Emerging market currencies and stocks both nudged higher, offering a modest boost to investors as the year draws to a close.
Currency Gains Near Two‑Month High
Emerging market currencies rose about 0.4%, reaching levels not seen since late October.
Why the rally?
- Weaker US dollar: A softer dollar makes higher‑yielding emerging‑market assets more attractive.
- Expectations of US rate cuts: Investors anticipate the Federal Reserve will lower rates, which usually reduces dollar strength.
- Local policy support: Countries like South Korea and Israel saw domestic moves that helped their currencies.
Stock Markets Follow Suit
Emerging market equity indexes also rose 0.4%, on track for their longest winning streak in over a month.
- China’s Shanghai Composite up 0.5% and CSI300 up 0.3%.
- Vietnam posted a record opening high after a leadership meeting signaled political stability.
- South Korea’s KOSPI slipped 0.2% despite a stronger won.
Domestic Factors Adding Nuance
Beyond the Fed, local data helped the rally.
- Brazil and Mexico reported milder‑than‑expected inflation, easing concerns.
- Turkey’s government raised the minimum wage by 27% for 2026, which could pressure inflation later.
- Israel announced a plan to tax banks’ excess profits, reflecting political pressures.
Liquidity Outlook
With most markets closed for the holiday, trading volume is expected to stay thin through the end of the year.
Takeaway for Retail Investors
Higher‑yielding emerging‑market currencies and equities are looking attractive right now, but thin liquidity and upcoming policy changes mean investors should stay cautious.
Remember, this is perspective, not a prediction. Do your own research before making any investment decisions.