Emerging Assets Cap Off Week of Gains Ahead of Fed Rate Cut

FX, Commodities, Equities Strengthen as Dollar Falls

Emerging market assets capped off a week of gains on Friday, as the US dollar weakened ahead of a widely expected interest rate cut by the Federal Reserve.

The MSCI index of emerging market currencies rose 0.4% on Friday, bringing its weekly gain to 1.2%. The index has now gained for six consecutive weeks, its longest winning streak since April 2017.

Commodities also strengthened on Friday, with the Bloomberg Commodity Index rising 0.6%. The index has now gained for four consecutive weeks, its longest winning streak since January 2018.

Stronger Risk Appetite

The gains in emerging market assets were driven by a stronger risk appetite among investors, as the Fed's dovish stance eased concerns about a global recession.

The Fed is widely expected to cut interest rates by 25 basis points at its meeting next week. This would be the third rate cut this year, and it would signal that the Fed is concerned about the slowing global economy.

Emerging Market Currencies

Among emerging market currencies, the Brazilian real led the gains on Friday, rising 1.2% against the US dollar.

The real has been one of the best-performing emerging market currencies this year, gaining over 10% against the US dollar.

Other emerging market currencies that strengthened on Friday included the Russian ruble, the South African rand, and the Turkish lira.

Emerging Market Stocks

Emerging market stocks also strengthened on Friday, with the MSCI index of emerging market equities rising 0.5%. The index has now gained for three consecutive weeks, its longest winning streak since April 2019.

Among emerging market stocks, Chinese stocks led the gains on Friday, rising 1.2%. Chinese stocks have been buoyed by the government's recent stimulus measures.

Other emerging market stocks that strengthened on Friday included Indian stocks, Russian stocks, and Brazilian stocks.

Conclusion

Emerging market assets capped off a week of gains on Friday, as the US dollar weakened ahead of a widely expected interest rate cut by the Federal Reserve.

The gains in emerging market assets were driven by a stronger risk appetite among investors, as the Fed's dovish stance eased concerns about a global recession.