Emerging market currencies were eyed by investors on Wednesday as weak oil prices, China’s market pain and after the Federal Reserve left its interest rates unchanged.
After major EM currencies tanked on Tuesday, the Brazilian real gained more than 1 percent on Wednesday from a 12-year low. The Turkish lira remained near record lows and Asian currencies held around their lowest levels in nearly two decades. Weighing heavily on the outlook for EM currencies was the uncertain future path of U.S. monetary policy.
No “fireworks” in EM financial markets were expected after the statement, but currencies along with equities were likely to bear the brunt of any subsequent market stress, according to Capital Economics’ David Rees, ahead of the release. And traders are struggling to find EM currencies in the region where they can be “long”— or buying a security in the anticipation that it will rise in value— as the outlook remains highly vulnerable to rising interest rates.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.