US data shows business activity grows at its fastest pace in two yearsblockchaingamesonandroidEmerging market assets fell as investors strengthened their bets that the Fed would keep interest rates high for a longer period of time.
On Thursday, the MSCI Emerging Markets Currency Index fell less than 0.blockchaingamesonandroid.1%, after the U.S. Purchasing Managers 'Index (PMI) exceeded expectations, triggering risk aversion in global markets and U.S. Treasury yields soared. Emerging market stocks fell 0.0%blockchaingamesonandroid.4%。
Win Thin, managing director and head of global market strategy at Brown Brothers Harriman, said: "The strong PMI has brought the excellent performance of the U.S. economy into the spotlight again. Coupled with the tough wording of the FOMC meeting minutes, it is obvious that the Fed will not cut interest rates in the short term, which will help the dollar gain more support."
Minutes of the FOMC meeting released on Wednesday showed that some policymakers have expressed a willingness to tighten monetary policy if necessary.
Swap transactions now fully price U.S. expectations of a 25 basis point rate cut in December, which was previously expected to be in November. After strengthening economic data and betting that the Federal Reserve will continue to tighten interest rates, Thin said he expected the dollar to rebound in the coming days.
The South African rand, often seen as a bellwether of emerging market risk, fell 1.2%. In Latin America, currencies of Mexico and Colombia led the decline as the US dollar strengthened and metal prices fell. At the beginning of this year, Mexico's economic growth was weak and inflation accelerated further, exceeding target levels. This suggests that Mexico's economic growth momentum has been weakening due to weakening export demand and the impact of severe weather on agriculture.
Decliners in emerging market stocks overshadowed gains in semiconductor stocks in China Taiwan and South Korea. NVIDIA (NVDA.US) announced better-than-expected results, pushing semiconductor stocks in China Taiwan and South Korea to continue their upward trend.
Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, wrote in the report: "blockchaingamesonandroidWe believe that the growth prospects of artificial intelligence remain solid and there is more room for growth." Marcelli added that given that "there is still a large backlog of orders for artificial intelligence chips," investors can diversify their investment portfolios by increasing their investment in Asian AI-related companies.
As countries such as South Africa, India and Mexico elect the next government in the coming days, emerging market investors are also focusing on political risks. Wall Street investors have hinted that South African assets could rebound after next week's election as they support a coalition government led by the ruling African National Congress, which could ensure policy continuity.