Emerging-Market Currencies Advance on Trump’s Remarks on Dollar

(Bloomberg) -- Emerging-market currencies and stocks advanced as the U.S. dollar slumped after President-elect Donald Trump said the currency is “too strong.”

A gauge of developing-nation currencies reversed Monday’s slide led by the South African rand, the Russian ruble and Brazil’s real with the later getting an additional boost as the central bank acted to support the currency.

Trump said in an interview with the Wall Street Journal that the U.S. dollar was already "too strong" in part because China holds down its currency, adding the U.S. companies can’t compete with the Chinese because of the current level of the greenback. Dollar selling accelerated as algorithmic traders reacted to Trump’s comments and the Bloomberg Spot Dollar Index fell to the lowest level in a month.

The key question is whether Trump is referring to the broad dollar or more specifically to the greenback versus the yuan, said Gareth Berry, FX and rates strategist at Macquarie Bank in Singapore. If his comments referred to the broad dollar, then this could be a “game-changer”, said Berry.

Currencies

• MSCI emerging currency index gained 0.8 percent as of 1:17 p.m. in New York, rising to the highest level in more than two months.
• Turkey’s lira rose 1.1 percent, the most among developing-nation currencies.
• Brazil’s real advanced 1 percent as the central bank resumed its offerings of swap contracts intended to support the currency. Analysts said this shows BCB intention to blunt any possible volatility spurred by changes in U.S. economic policy after Trump inauguration.
• South Africa’s rand climbed 1 percent, almost erasing its steepest drop in a week on Monday as the World Bank said it sees a modest recovery for the country’s economy in 2017 and 2018.
• Bloomberg Spot Dollar Index fell 1.1 percent.

Stocks

• MSCI’s gauge of stocks advanced for the first time in three days, increasing 0.9 percent.
• Brazil’s Ibovespa index rose 0.9 percent to the highest in more than two months.
• Russia’s RTS index rose 0.5 percent.
• Egypt’s EGX 30 Index rose 1.3 percent to the highest on record.

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--With assistance from Netty Ismail and Vinícius Andrade

To contact the reporters on this story:
Alex Nicholson in Moscow at anicholson6@bloomberg.net
Aline Oyamada in Sao Paulo at aoyamada3@bloomberg.net
Sharon Wrobel in Tel Aviv at swrobel4@bloomberg.net

To contact the editors responsible for this story:
Dana El Baltaji at delbaltaji@bloomberg.net
Rita Nazareth at rnazareth@bloomberg.net
Alex Nicholson