Despite a weak first half marked by election surprises and uncertainty over Federal Reserve interest rates, developing currencies made gains on the final trading day. The South African rand and Chilean peso surged, lifting the emerging-market currency index by 0.2% after a U.S. price index slowed, hinting at potential rate cuts by the Fed.
Assets in the developing world have been volatile due to upcoming elections in major economies like France, the UK, and the U.S. However, stocks have shown resilience, posting a 6% return over the past six months. The rand’s rally was driven by optimism for a broad coalition government in South Africa.
The Mexican peso also strengthened after the central bank suggested maintaining restrictive policies despite potential interest rate cuts. In India, government bonds are set to attract significant inflows after being included in JPMorgan’s emerging market index.
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