South African rand slips as appetite for emerging markets assets wanes

BREAKING NEWSAugust 20, 2024 at 5:40 PM UTC

TLDR

Emerging-market assets showed mixed performance on Tuesday, with Indonesian rupiah, Thai baht, and Colombian peso performing well, while Brazilian real, Mexican peso, and South African rand weakened against the US dollar.
MSCI Emerging Markets (EM) currency index stayed stable, and the stock index had a slight gain, impacted by a decrease in Latin American equities.
Investors are monitoring the upcoming Federal Reserve's Jackson Hole meeting after last week's surge in demand for risk assets, influencing market momentum.

Emerging-market assets exhibited mixed performance on Tuesday as the momentum from last week's surge in demand for risk assets began to fade, with investors eyeing the upcoming Federal Reserve's annual Jackson Hole meeting.

Among currencies, the Indonesian rupiah, Thai baht, and Colombian peso outperformed their peers. In contrast, the Brazilian real, Mexican peso, and South African rand were the day's biggest losers, each weakening by 0.9% against the US dollar.

The overall MSCI Emerging Markets (EM) currency index remained relatively stable, while the MSCI EM stock index saw a modest gain, constrained by a decline in Latin American equities.

Key Takeaways

This cautious sentiment reflects market participants' anticipation of potential signals from the Fed regarding future monetary policy. Larger reductions in US borrowing costs could prompt policymakers in developing countries to adopt a more aggressive approach to easing their monetary policies, aiming to maintain competitive economic conditions and manage capital flows. The global financial community is closely monitoring these developments, as they could significantly influence emerging markets' economic strategies and financial stability.

Finance

Economy

Emerging Markets

South Africa

South African Rand

Monetary Policy

Interest Rates