Key Takeaways
- Emerging-market currencies paused their rally amid thin Thanksgiving trading
- Latin American currencies underperformed, reversing previous day’s gains
- JPMorgan now expects Fed rate cut next month, reversing earlier stance
- Asian currencies showed mixed performance with won climbing and yuan pausing
Emerging-market currencies halted their recent advance on Thursday as trading thinned during the US Thanksgiving holiday, with Latin American currencies particularly underperforming other developing markets.
The MSCI indexes tracking both emerging-market currencies and equities remained steady during the quiet session. The Chilean and Colombian pesos were the session’s worst performers, closely followed by the Brazilian real – marking a reversal for the region after strong gains the previous day.
Analyst Perspectives
“Today EMFX looks much calmer given the lack of data in the calendar and the long weekend in the US,” said Jose Prieto Jaramillo, business head at BTG Pactual in Bogota. He noted significant volatility in rate-cut expectations this month, with the latest ADP employment data reinforcing policy easing scenarios.
The Federal Reserve’s Beige Book supported this view, indicating employment declined slightly while prices rose moderately in its regional business survey.
Fed Expectations Shift
Economists at JPMorgan Chase & Co. now anticipate the Federal Reserve will cut interest rates next month, reversing their brief position that policymakers would delay reductions until January.
Asian Currency Movements
In Asian markets, the South Korean won climbed after the Bank of Korea removed language signaling a rate-cut bias from its statement, while maintaining openness to easing if needed.
The onshore yuan paused its four-day gain after China’s central bank set the currency fixing weaker than estimated for the first time since July.
“The fix has set a tone for Asian currencies,” said Fiona Lim, senior foreign-exchange analyst at Malayan Banking Berhad in Singapore. “A December rate cut is already priced in around 80%. As such, I think it is hard for the USD to break out of its recent ranges either way.”
Bullish Fundamentals Remain
The day’s moves didn’t alter the overall bullish environment for developing assets this year.
“Emerging-market fundamentals look in good shape and repayment risks seem low with most at-risk sovereigns expected to meet their Eurobond payments through 2026,” JPMorgan stated in its EM sovereign credit outlook.
The bank noted EM sovereign spreads haven’t been at such tight levels for this duration since before the global financial crisis.
Debt Market Developments
In primary debt markets, Poland’s debt chief announced the government plans to front-load its 2026 international issuance calendar following budget deficit widening from defense spending.
Meanwhile in Latin America, Moody’s Ratings downgraded sugar producer Raizen SA, cutting one of Brazil’s last remaining investment-grade corporate credits to junk status.
