Emerging FX Trim Losses as Brazil’s Real Jumps on Trump Comments

Developing currencies pared losses as world leaders including US President Trump speak at the United Nations’ General Assembly while traders react to mixed messages from Federal Reserve officials about the outlook for rate cuts.

A gauge of emerging-market currencies nearly erased earlier drops on Tuesday. Brazil’s real jumped as much as 1.1% to a session high as Donald Trump said he will meet with Brazilian President Luiz Inacio Lula da Silva next week. A similar measure for stocks rose 0.2%.

Argentina’s peso climbed over 4% after US Treasury Secretary Scott Bessent vowed to provide “all options for stabilization” for President Javier Milei’s beleaguered economy. Milei is expected to meet with Trump, Bessent and the International Monetary Fund on Tuesday.

Traders are also looking for clarity on the Fed’s rate path. Governor Michelle Bowman struck a dovish tone by saying that policymakers are in danger of falling behind and need to act decisively to bring down interest rates as the labor market weakens. In contrast, Bank of Atlanta President Raphael Bostic and Bank of Chicago President Austan Goolsbee both warned about inflation. 

“The pro-carry sentiment remains in stay as the market goes through Fed speaks,” said Ning Sun, a senior emerging markets strategist at State Street Global Markets in Boston.

Meanwhile, India’s rupee fell to a fresh low on concerns that the steep increase in US visa fees announced by the Trump administration will put pressure on software margins and weigh on remittances. India’s Nifty 50 stock index also declined.

“Our data indicates that cross-border clients continue to own relatively high levels of Indian equities, which may also be at risk of an unwind,” Yu said. “In contrast, fixed-income holdings are no longer as elevated.”

The Philippine peso and the Indonesian rupee also lagged, while the Malaysian ringgit was among the top performers across an EM basket tracked by Bloomberg.

In Europe, Hungary’s central bank kept its base rate unchanged following the release of fresh inflation forecasts and a press briefing. Hawkish central bankers in both Hungary and the Czech Republic helped put their currencies at the top of the global pack this year, with a growing cohort of investors saying the gains will continue.

Romania plans to buy back some of its foreign bonds and replace them with new notes this year. The operation may also include raising fresh funds from international markets, according to the country’s treasury chief.

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