Gauge of EM currencies rises as dollar slides on thin trade

(Bloomberg)-A gauge for emerging markets acquired as President Donald Trump’s attempt to extend a deadline for aggressive rates on the European Union Reinforced risk appetite, characterized by thin trade volumes due to holidays in the US and UK. MSCI’s Gauge of EM FX, a total return index that includes interest on those currencies, climbed to 0.4% to a peak of all time, although development nation currencies were largely mixed amid low liquidity. A meter of the dollar hovered near its lowest level in almost two years. In some stock markets, there was also a risk-on-sentiment, although MSCI’s broad partner for shares dropped. South Korea’s benchmark was the striking, with 2%, while Nifty’s 50 Gauge flagship climbed 0.6%. “We are really starting to see that the stars are in line now,” Amy Oldenburg, head of the emerging market equity for Morgan Stanley Investment Management. “We’ve seen the dollar weaken very significantly – it really gets a wind wind for some of our markets.” The moves came when Trump extended the tariff date on the European Union until July. The EU agreed to accelerate negotiations with the US to avoid a transatlantic trade war, after a phone call between Commission President Ursula von der Leyen and Trump – a few days after the US president criticized the block. The enthusiasm for the Greenback has faded this year due to the unpredictable trade policy of Washington and concerns about the fiscal deficit, all of which have dived the US investment case. “Trump’s unpredictable trade and fiscal policy means that investors have to hedge and redistribute US exposure more carefully and redistribute US assets,” said Henrik Gullberg, Macro strategist at Coex Partners Ltd. The Polish Zloty was the top profit in emerging markets on Monday. Brazil’s rights, meanwhile, underperform amid persistent Jitters on fiscal policy and new tax measures. The government’s plan to increase a tax on financial transactions has been met with criticism, and Finance Minister Fernando Haddad has deleted a 3.5% tax on foreign investment from Brazilian funds. Haddad told reporters on Monday that the government would decide on new fiscal measures by the end of the week. Rates, Ukraine, while Trump’s decision to extend the EU tariff date helps EM currencies, “Profits have been relatively modest so far,” says Piotr Matys, a senior analyst at Intouch Capital Markets. This could “be attributed to concern that Trump’s rates could have stagflationary consequences for the US economy, which for many EM countries is the most important trading partner.” Elsewhere, Trump said he “absolutely” considers “a new sanctions against Russia amid increasing violence in Ukraine. Trump made the remarks to reporters on Sunday, which showed increasing frustration with Russian President Vladimir Putin and the state of peace talks. The dollar effects of Ukraine showed investors the worst of emerging and border markets in 2025 as prospects for a peace agreement. It is a sharp turnaround of earlier gains around the turn of the year, when the ceasefire remedies made Ukrainian debt a top performer. -With help from Marcus Wong and Catherine Bosley. More stories like these are available on Bloomberg.com © 2025 Bloomberg LP