Emerging-market currencies extend losses before Fed meeting

Emerging-market currencies are having the longest losing streak in more than a year ahead of a Federal Reserve meeting later Wednesday that's set to offer clues on the demand for riskier assets worldwide.

The benchmark currency index dropped 0.1% in its seventh day of losses, with none of the 23 emerging-market units tracked by Bloomberg registering any significant daily gains against the dollar.

Traders will look for guidance on the outlook for US interest rate cuts, which will determine the path of higher-yielding emerging-market assets. The Fed meeting comes after the Bank of Japan on Tuesday eliminated the world's last negative interest rate regime, while maintaining accommodative financial conditions. The dovish stance weakened the yen, a source of one of the most popular carry trades where investors borrow to invest in EM bonds.

EM currency losses are "mainly reflecting unease over the risk of a more hawkish policy message from the Fed tonight after another month of disappointing US inflation data for February," said Lee Hardman, foreign-exchange strategist at MUFG. "We still expect Chair Powell signal support for rate cuts which could provide some relief for EM FX especially the high yielding carry trades."

Stock Gains

The Czech koruna was one of worst performers before the central bank rate decision in Prague.

Zambia's $1.25-billion July 2027 bonds advanced to the highest in almost two years and were quoted at 72 cents on the dollar after news of the resumption of debt restructuring talks between the government and private creditors.

The MSCI EM stock index rose 0.1%, with Samsung Electronics Co. gaining the most in more than six months after Nikkei Asia reported Nvidia Corp is looking to buy its high-bandwidth memory chips. Samsung is the stock with the second highest weighting in the EM benchmark equity index.