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EMStocks, FX Rise on Dovish Fed, Commodity Gains

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May 18 Reuters Emerging market stocks and currencies rose on Tuesday after comments from the Federal Reserve downplayed the possibility of early policy tightening, while a jump in commodity prices saw the South African rand leading gains.

MSCIs index of EM stocks surged 1.5 and was set for its best day in more than two weeks as bourses in Asia bounced back from recent losses.

The index of EM currencies rose 0.3 after Dallas Federal Reserve President Robert Kaplan reiterated his view that he does not expect interest rates to rise until next year, prompting a drop in the dollar and Treasury yields, while benefiting riskdriven assets.

High inflation or inflation expectations and an unchanged Fed approach are an unfavourable constellation for USD, YouNa ParkHeger, FX and EM analyst at Commerzbank wrote in a note.

An increasing number of central banks seem to be waking up from their pandemic paralysis and are reacting to the improving economic situation and rising inflation.

Gains in gold, oil and base metal prices pushed the South African rand up 0.6, the most across currencies in Europe, the Middle East, and Africa EMEA.

The currency is among the best performing EM units this year because of its relatively high yield.

Hungarys forint rose 0.3 to a near ninemonth high against the euro, extending steep gains from Monday after the countrys central bank flagged a possible rate hike in June to tame inflation.

Data also showed Hungarys economy shrank less than expected…

AUD, NZD in Tight Bands awaiting Clues on Inflation

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