Emerging-Market Currencies Are Ripping

Several high-beta emerging-market currencies are having a great day against the U.S. dollar — especially the Turkish lira, the Brazilian real, and the South African rand (pictured above).

It’s been about two months since the worst of the selling in an episode that sent the lira to record lows and saw the rand and the real fall to their lowest levels since 2008.

The biggest gainer of the three today is the real, up 1.1% against the dollar. The rand is up 0.9% and the lira is up 0.3%.

All of these currencies have been strengthening in recent days. The rand got an additional boost today after the South Africa Reserve Bank left its benchmark policy interest rate unchanged and hinted that hikes may be coming.

In Brazil, the move is being attributed to sovereign credit rating downgrade by S&P this week, the idea being that the action was priced in beforehand and market participants can move past that news now. In general, this action probably suggests EM investors are closing out short positions in these volatile currencies as they strengthen.

Not all of the “fragile five” emerging economies, as they are known, have stronger currencies today. The other two, India and Indonesia — are both seeing their currencies weaken against the dollar.

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