2023-10-09 19:38:00
Hoy 16:38
He outbreak of conflict in the Middle East joins a long list of concerns that lead investors to get rid of developing country assets and opt for the safety of the dollar.
The weekend surprise attack on Israel provoked the fall of Middle East stocks y had an impact on the currency markets in Mexico and Eastern Europe. The crude rose more than 3%. Bond trading United States Treasury It is closed on Monday for a holiday, which helps limit a broader sell-off in risk assets.
Investors were already fleeing emerging markets even before the conflict broke out. I activated thems have already canceled the progress so far this year and fewer and fewer currencies hold firm once morest the dollar.
Global indications that Interest rates will stay high for longerthat the increase in oil prices has limited how much developing countries They may ease their monetary policies to boost their economies and disappointing Chinese data have made a dent in the expectations of improvement in global growth.
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Then there is the historic move in the US bond markets, which accelerated the fall. Exchange-traded funds that buy stocks and bonds from developing countries They have recorded five consecutive weeks of departures. Just last week, they came out US$3.120 million. Debt default insurance (known as CDS), which protects bondholders once morest a major emerging market default within the next five years, They increased for the fifth consecutive week, the longest streak since May 2022.
The accumulation of factors has discouraged traders from taking risksand the money has gone en masse towards the safety of the dollar, gold, or global bonds.
Negativism has not only affected countries in a deep state of distress, such as Ethiopia, Argentina and Egypt, but also to more stable negotiations. The appeal of Latin American currencies—which had topped the list of emerging market winners this year— has faded due to exacerbated volatility. Los carry trade in emerging markets They are heading for a third monthly loss, the longest streak since November 2021.
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Now, concerns regarding the escalation of the conflict – including the possibility of the US taking a more active role and a Wall Street Journal article alleging that Iran was actively involved in planning the attack – should further reduce demand for riskier assets.
“The general consensus is that the effects of this conflict van to be located“said Simon Harvey, head of currency analysis at Monex Europe Ltd. “But there is a risk that this expands into a major conflict that threatens to destabilize the region as a whole, and that is why a lot of attention is being paid to the actions of the US and Iran in the coming days.
The sequel fell more than 2% once morest the dollar even following the Bank of Israel unveiled an unprecedented US$45 billion to defend the currency. U.S.-traded exchange-traded funds that track Israeli assets recorded the largest intraday decline since March 2020.
A liquidation too affected the highest yielding currencies which were popular with operators of carry trade earlier this year, like the Mexican peso and its Eastern European peers. The peso fell 0.8%, one of the worst performances in emerging markets.
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“For now, the impact is largely being diverted through the risk channel and that is why we see that currencies with saturated positions are the most affectedHarvey said.
In the dollar bond market, Israel and Jordan recorded some of the biggest losses in emerging markets.
Translated by Malu Poveda.
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