EMFX Set for Robust Weekly Gains on Interest Rate Hikes

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Mexican Peso top weekly performer after surprise rate hike

Czech crown, Hungarian forint also eye strong gains

EM stocks up 1.4 this week, FX up 0.2

Argentina in focus as MSCI rescinds emerging market status

June 25 Reuters Most emerging market currencies rose on Friday, and were set for a strong finish to a week marked by several interest rate hikes across the space as well as waning fears over immediate policy tightening by the U.S. Federal Reserve.

South Africas rand rose 0.3, leading gains across Europe, the Middle East and Africa EMEA as weak overnight U.S. data and the approval of an infrastructure spending bill brought down Treasury yields.

Lower U.S. Treasury yields make emerging market currencies look more attractive.

The MSCIs index of EM currencies rose 0.3, and the equity index jumped 0.9. Both were set to post gains for the week.

A bevy of Fed speakers this week appeared to have convinced markets that a recent spike in inflation would be transient, and that the bank would maintain its massive stimulus program for the time being.

Although the Fed appeared set to maintain an accommodative stance in the nearterm, several EM central banks began hiking rates this month to stave off a postCOVID19 spike in inflation.

Mexicos peso was the stand out performer this week after the central bank unexpectedly hiked rates to 4.25. The currency surged 1.6 overnight and was set for a weekly gain of nearly 4, the most among its EM peers.

The peso is likely to…

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