Currencies firm against steady dollar; Brazil's real rebounds

  • Russia's rouble nears seven-month high against dollar.
  • Brazil's real up 0.9%, on track to offset Monday's losses.
  • BlackRock overweight on EM equities.
  • Argentine peso depreciation to slow in coming months –Guzman.
Updated 16 Mar, 2021

Emerging market currencies shook off initial sluggishness to gain on Tuesday against a dollar steadying ahead of the US Federal Reserve's policy decision.

Russia's rouble touched its highest since July despite declining oil prices, while Turkey's lira firmed half a percent.

In Latin America, Brazil's real rose 0.9% after sliding more than 1% on Monday. Locally, eyes were on the central bank's rate meeting on Wednesday when it was expected to hike rates to contain inflation.

Globally, focus was on the Fed's policy decision, due ahead of Brazil's verdict on Wednesday. The Fed has had interest rates pinned near zero for the past year, and has promised to keep them there until the economy reaches full employment, and inflation has hit a sustained 2%.

The dollar steadied as investors awaited the Fed's signal to make further investment choices. Riskier currencies such as those of emerging markets thrive on US interest rates remaining low as they benefit from the interest rate differential that increases their appeal for carry trade.

Mexico's peso hit a two-week high, while Colombia's currency recovered from its worst day in four months.

Main stock indexes in Latam were muted in early trade, compared with a 0.7% rise for a broader index of EM stocks .

"We still expect EM equities to benefit from a global cyclical upswing, supported by a stable US dollar," said Jean Boivin at BlackRock, adding the asset manager was overweight on emerging equities and had used recent dips to add to its exposure.

"The commodity price rally should also help resource-rich EM economies, in our view."

Iron ore miner Vale was the top boost on Brazil's Bovespa index as iron ore prices surged more than 5%.

Peru's sol lagged peers, inching lower.

The country's populist presidential front-runner Yonhy Lescano plans to renegotiate a fairer distribution of mining wealth if elected to lead the world's No. 2 copper producer, and also allow imports of cheaper natural gas, he told Reuters less than a month before the April ballot.

In Argentina, Economy Minister Martin Guzman said the depreciation of the Argentine peso will slow over the months ahead, leading to a slowdown in inflation. Meanwhile, the government said Argentina's industrial output should grow more than 6% this year versus 2020.

Read Comments