South Korean 50,000 won banknotes at the Bank of Korea headquarters.
(Bloomberg) — Developing-nation assets traded mixed Monday ahead of a key speech by Federal Reserve Chairman Jerome Powell later this week where traders will get clues on the path of monetary policy in the world’s largest economy.
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The Brazilian real led a gauge of emerging-market currencies lower as the greenback advanced. Meantime, the benchmark index for emerging-market stocks edged higher, though it pared much of the advance seen during Asian trading hours.
For much of the day, traders were looking forward to President Donald Trump’s meeting with his Ukrainian counterpart Volodymyr Zelenskiy. They expressed optimism their summit with European leaders could result in trilateral talks with Vladimir Putin over ending the Russian leader’s war in Ukraine. Now traders are focusing on the Fed’s annual retreat at Jackson Hole where Powell will speak at the end of the week.
“Markets are in a bit of a holding pattern until we get to Jackson Hole on Friday,” said Brendan McKenna, an economist at Wells Fargo in New York. “The CPI and PPI data have markets a bit concerned Powell won’t come” out too strongly in favor of cutting rates next month. “Markets don’t want to be caught offside leading into the symposium.”
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US interest-rate swap traders are pricing in over 100 basis points of interest-rate reductions by the US Federal Reserve over the next 12 months despite expectations of a rise in inflation, Deutsche Bank AG analysts led by Jim Reid said in a note.
“There’s been incredible buoyancy across risk assets that’s seen valuations become increasingly stretched,” the analysts wrote.
Elsewhere, Bolivia’s dollar bonds were the biggest gainers among emerging-market peers after voters elected two pro-business candidates to face off in an October runoff for the presidency. Notes due in 2028 and 2030 jumped at least 3 cents on the dollar to above 80 cents, the highest in two years, according to data compiled by Bloomberg.
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Ukraine’s dollar bonds were also among the top performers holding on to gains through the summit in the White House. Still, given the wide gap in negotiating positions and a lack of decisive developments on the battlefield, a team led by UBS Global Wealth Management’s Chief Investment Officer Mark Haefele wrote in a report the war is likely to go into next year.