Emerging FX slips against stronger dollar, stocks dip

Emerging market currencies fell on Tuesday as the dollar saw a modest rebound, while scepticism about US-China trade talks weighed on developing world stocks.

The dollar recovered some lost ground against a basket of major currencies, rising off over two-and-a-half month closing lows clocked on Monday, to exert pressure on emerging currencies which had broadly firmed in recent sessions.

MSCI’s index of emerging market currencies slid 0.3%, while its developing world stocks index fell 0.5% as shares in index-heavyweights China , South Korea and Taiwan all declined.

“It is very hard to have a clear view on the outcome of the US-China talks, I think consistently trade talks have surprised to the downside relative to the consensus over the past few months,” said Stuart Ritson, head of Asian rates & FX at Aviva Investors.

“I think with the growth forecasts, PMIs, it’s pretty hard to paint a positive picture for pro-cyclical assets. I think the combination of trade concerns and growth outlook suggests a pretty cautious outlook for risky assets.”

Shares of South Korean tech giant Samsung fell 1.7% after it cut its quarterly profit outlook, blaming weak chip demand.

Read: Samsung shares Apple’s pain as technology slowdown hurts sales

South Africa’s rand softened 0.7%, while the Johannesburg Stock Exchange Top 40 index Tradeable index was 0.5% higher, with most financials rising.

Turkey’s lira slid half a percent against the firm dollar and Russia’s rouble was 0.8% weaker. The rouble-based MOEX Russian index shed 1.1%, as losses were incurred across most sectors.

Emerging European currencies dipped against the euro. Data from Germany, a destination for many eastern European exports, showed industrial output in the Eurozone’s top economy fell for a third straight month in November.

Poland’s zloty, Romania’s leu and Hungary’s forint all slipped against the common currency and each clocked losses of more than 0.3% versus the dollar.

The leu was 0.1% softer against the euro ahead of a Romanian central bank meeting which is expected to leave rates unchanged.

Source: moneyweb.co.za