© Reuters. FILE PHOTO: Illustrative image of US dollar and Chinese yuan bills
By Vivek Mishra
BENGALURU, April 5 (Reuters) – Most emerging market currencies are expected to rise over the next 12 months as investor concerns about financial stability ease and they buy riskier assets, according to a Reuters survey of analysts, who have greatly improved last month’s forecasts.
Although most currencies will rise in the next 12 months, the survey of 60 currency analysts from March 31 to April 4 predicted near-term volatility, with only the South Korean won and Thai baht recouping 2022 losses. .
Emerging market assets have benefited from their exposure to commodities, which have held strong against a weaker US dollar after the Federal Reserve signaled last month that it was about to end a cycle of historically aggressive tightening.
“With the global economy showing greater resilience and the Federal Reserve slowing its pace of tightening, we think EM currencies may outperform their G10 counterparts this year,” wrote Nick Bennenbroek, international economist at Wells Fargo (NYSE:).
“Attractive real yields should prompt market participants to build up exposure to developing country currencies, while our case for subdued banking sector stress should lead to improved risk appetite.”
While most EM currencies have risen against the greenback so far this year, the South Korean won, Russian ruble, South African rand and Turkish lira have all fallen.
For emerging markets in general, a lot still depends on global interest rate developments, largely led by the Federal Reserve in the near term.
“Unless the Federal Reserve is overly pessimistic, this implies a bullish bias for the dollar against emerging currencies,” said Mitul Kotecha, head of emerging markets strategy at TD Securities.
The , Indian rupiah, Indonesian rupiah, Singapore dollar and Vietnamese dong are expected to gain between 0.5% and 3% over the next 12 months, while the Philippine peso is expected to weaken by around 1%.
The Russian ruble would appreciate 3%, to 77.0 units per dollar, in the next six months, thanks mainly to the rise in prices of .
The South African rand, down 5% so far this year, would gain 2% to 17.5 per dollar over the next 12 months.
The Turkish lira, the worst-performing emerging-market currency last year with a 29% drop, will lose another 15% to 22.5 per dollar in a year. Turkish presidential and parliamentary elections scheduled for May 14 add to uncertainty.
(Reporting by Vivek Mishra; Polling by Veronica Khongwir and Devayani Sathyan; Editing in Spanish by Ricardo Figueroa)
