Developing-nation currencies fell as merger talks with South Africa’s MTN Group failed, a member of Romania’s ruling coalition resigned and Fitch Ratings cut Ukraine’s state-run energy company to “restricted default.”
South Africa’s rand slumped the most among currencies worldwide, retreating 2.3 per cent to 7.6842 per dollar at 1:03 p.m. in Johannesburg, as investors reversed bets that currency purchases to fund the merger would boost the exchange rate.
The Romanian leu lost 1.1 per cent to 4.2629 per euro as the leader of the Social Democrats said the junior coalition member will leave the government after the dismissal of a cabinet minister.
Emerging-market currencies, bonds and stocks have rallied this year as signs of a global recovery lured investors into higher-yielding assets.
Even after the rand’s decline, the currency has gained 23 per cent this year, the second-biggest advance among emerging-market currencies after Brazil’s real.
“There is an element of profit taking, prompted by the large move in rand,” said Nigel Rendell, emerging markets strategist at RBC Capital Markets in London.
More From This Section
“Most of the emerging-market currencies look expensive now.”
Ukraine’s hryvnia weakened for the first time in six days, slipping 1.3 per cent to 8.3100 per dollar. Fitch cut its credit rating on NAK Naftogaz Ukrainy, the state-run energy company that missed a principal payment on Eurobonds yesterday, to “restricted default.”
The Polish zloty lost 0.7 per cent to 4.2326 versus the euro. Eureko BV will convert cash it may receive to resolve a dispute over ownership of Polish insurer PZU that may be announced on Thursday.
Manufacturing growth
The MSCI Emerging Markets Index added 0.1 per cent to 914.47, bringing this year’s advance to 61 per cent, after reports showed manufacturing grew for the first time in 14 months in Russia and expanded at the fastest pace in 17 months in China, reports showed on Thursday.
Russia’s Micex Index climbed 1.6 per cent. China’s equity market in Shanghai was closed for National Day celebrations.
Emerging markets will probably expand 6 per cent next year, HSBC Holdings wrote in a report, raising its outlook from 5.3 percent growth forecast earlier.
The International Monetary Fund (IMF) lifted its projection for global growth next year to 3.1 per cent, from 2.5 per cent predicted in July.
“For both cyclical and structural reasons, the emerging nations are set to dominate world economic activity in the years ahead,” HSBC chief economist Stephen King wrote in the report.
The extra yield investors demand to own developing nations’ bonds instead of US Treasuries was unchanged at 3.27 percentage points, according to JPMorgan Chase & Co.’s EMBI+ Index.