EMERGING MARKETS-FX mixed as markets assess prospects for larger Fed hike; stocks gain

By Reuters News

By Sudeshna Ghoshal and Ragini Mathur

- Emerging-market currencies traded mixed on Wednesday, as a stronger dollar and renewed concerns that US interest rates could remain higher for longer pressured riskier assets, while equities still extended their recovery on technology-sector strength.

Overnight data showed that US core inflation accelerated more than expected. Fed policymakers also struck a hawkish tone, leading markets to price in a quarter-point increase in December as nearly certain, with an 11% chance of a half-point move.

The dollar index climbed to a two-week high.

A firmer dollar tends to weigh on developing-market currencies by drawing capital toward the US and reducing appetite for riskier investments.

South Africa's rand dipped 0.2%, while Malaysia's ringgit slipped to 4.070 per dollar, its weakest in a week.

On the other hand, the Indian rupee gained 0.3% and Korean won jumped 0.6%.

MSCI's emerging-market currency index .MIEM00000CUS was up 0.2%, while its equity index .MSCIEF rose 1.9%.

South Korea's .KS11 and Taiwan's .TWII tech-heavy benchmarks climbed 2.6% and 3.6%, respectively, extending their rebound from an AI-driven selloff after strong CoreWeave CRWV.O results reassured investors about AI infrastructure demand.

India joined the broader Asian equities rally after a market holiday on Tuesday. The Nifty 50 .NSEI rose 0.3% and the Sensex .BSESN added 0.4%, with both indexes hitting eight-month highs.

Moody's raised its forecast for India's growth to 7% from 6.5% for the fiscal year ending March 2027, citing broad-based expansion and resilience to the energy-supply shock caused by the Iran war.

In emerging Europe, Romania's leu was flat against the euro ahead of a central-bank meeting later this week, where policymakers are expected to leave rates unchanged.

Romanian stocks .BETI gained 0.2%, while other regional currencies edged lower, led by the Hungarian forint , which was down 0.4%.

Polish markets were shut for a public holiday. Recent escalations in political divisions put Polish assets in focus. The zloty was down 0.2% on Wednesday.

Among the challenges for Poland's markets are a "big budget deficit, higher global yields by now, also S&P lowered the credit rating outlook," said Tilmann Kolb, EM strategist at UBS Global Wealth Management.

"And that going into an election year is a bit of a difficult backdrop."

Russian, Ukrainian and US officials began a second day of peace talks in Abu Dhabi on Wednesday. Ukrainian sovereign bonds eased off six-week highs reached in the previous session.

Indonesian stocks .JKSE bucked the broader equity rally, falling 0.3% ahead of MSCI's November index review later in the day. The rupiah weakened 0.5%, with investors on edge after MSCI warned last month that Indonesia could lose its emerging-market classification.

Elsewhere, Israel's shekel was little changed against the dollar, while its equities .TA125 were down 0.2%, after parliament was sworn in without a new government following an inconclusive election.



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