Positive momentum for Emerging Markets as US dollar weakens

Emerging market currencies strengthened as the US dollar lost ground following President-elect Donald Trump’s decision to nominate Scott Bessent, a Wall Street veteran, as Treasury Secretary. The announcement sparked optimism for market-friendly policies, reducing concerns over the potential for severe tariffs and boosting confidence in global financial markets. This development also resulted in lower Treasury yields, creating a favourable environment for emerging market assets.

Analysts viewed Bessent’s nomination as a step towards more balanced economic strategies. Jane Foley, a senior FX strategist at Rabobank, highlighted that this decision could temper the effects of ‘Trump trades,’ providing a stabilising effect for markets. This sentiment was reflected in gains for currencies like South Africa’s rand and several others in emerging European markets.

In addition to these political developments, broader global factors continue to play a significant role in shaping emerging markets. While challenges persist in certain regions, such as China’s stock performance and political issues in Romania, there were positive developments elsewhere. For instance, India’s electoral results offered a boost, contributing to a 0.6% rise in MSCI’s emerging market equities index.

The combination of political changes in the US and global macroeconomic dynamics has provided emerging markets with a much-needed lift, reinforcing optimism for continued growth and stability.

Fidelity Emerging Markets Limited (LON:FEML) is an investment trust that aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging markets companies, both listed and unlisted.

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