As the G20 summit got underway in Buenos Aires, Argentina, currencies from emerging markets saw an upward trend, one of its strongest in months.
This comes after the US Federal Reserve Bank Chairman, Jerome Powell gave some speculative statements regarding the US dollar. In his statement, he portrayed a neutral outlook, stating that the US Central Bank’s policy rate is currently “just below” estimates.
This has spurred investor’s risk appetite, as most have interpreted the statement as a loosening of the Fed’s almost three-year conservative approach towards rate rises.
As a result of this, the dollar weakened across the board, and other currencies have been quick to recover in the other direction. MSCI data showed that emerging markets stocks reached a 3-week high, rising by 0.7 percent.
Here’s how the ongoing G20 summit and other major factors affect these key emerging markets
The South African rand (ZAR) increased from 13.6581 to 13.8697, a jump of 0.2116 or roughly 1 percent, following Powell’s statement. This comes at the tail end of an almost three months high against the US dollar, one of its strongest performance in years. Volatility is expected as the G20 summit details are unveiled.
China’s yuan weakened as markets have slowed down to a cautious pace, with its manufacturing sector stalling for the first time in years, with everyone fixated on the high-tension meeting between US President Donald Trump and China’s President Xi Jinping. This is in anticipation of any further worsening of tariffs if the talks don’t pan out in China’s favor.
The Brazilian real climbed to an all-time record high, closing at 3.85, despite seeing some volatility and ending the session at a slightly lower than predicted position. Pressures regarding a delayed Senate vote to approve an offshore oil auction worth an estimated 130 billion reals also affected the currency’s final position.
The Russian ruble dropped by 0.5 percent. This is likely due to US President Donald Trump cancelling its meeting with Vladimir Putin amidst rising tensions regarding the Kerch Strait incident with Kiev. The US dollar on the other hand recovered by roughly the same amount.
The Indian rupee is at its strongest point in the past 3 months. Forecasts by the Reserve Bank of India indicate that interest rates won’t be raised until at least early next year. It has pretty much stabilized, recovering 6.54% from a low of 74.48 to the dollar last October.
Market behavior in the past weeks has largely been driven by the highly anticipated G20 Summit in Argentina, where the world leaders from 20 nations converge.
The meeting with US President Donald Trump and Chinese President Xi Jinping is particularly of interest to many, with investors hoping for a reduction of tariffs and tensions amidst the trade war going on between the two superpowers that greatly affect the global financial ecosystem.
If the two nations fail to reach an agreement, higher tariffs on Chinese goods entering the US market, including consumer items such as Apple products, could have serious repercussions on the fate of global trade and the performance of the Chinese yuan. As we enter the first week of December, the effect of the G20 summit will be seen as market data emerges.