A broad rally in emerging-market equities and currencies gripped investors this week, as the U.S. dollar softened following dovish Fed rhetoric. The MSCI Emerging Markets Index climbed 2.7%, led by gains in Brazil, South Africa, and India.
The Brazilian real strengthened 1.8% after the central bank delivered a smaller-than-expected rate increase, while South Africa’s rand rose 2.3% on improved trade data. India’s rupee appreciated 1.1%, buoyed by robust services exports and foreign inflows into local equities.
IGS Investment’s Emerging Markets Strategist, Vikram Acharya, explained:
“We saw synchronized monetary easing across several EM central banks, reducing funding costs and reinvigorating appetite for risk assets. Our regional models now favor Latin America over EMEA, given relative growth prospects.”
Commodity-linked currencies benefited alongside higher oil and base‐metal prices, while Turkey’s lira remained under pressure due to ongoing policy uncertainty. IGS Investment highlights that political developments in key countries could create volatility, and recommends using dynamic currency overlays to manage exposure.