Emerging Market Currencies Hold Steady Awaiting Powell's Speech

Emerging market currencies remained flat as investors waited for a significant speech from U.S. Federal Reserve Chair Jerome Powell. While regional stocks dipped slightly, the Turkish lira hit a record low, and the South African rand saw gains. Key signals on U.S. rate cuts are highly anticipated.

Emerging market currencies stayed subdued on Friday as investors remained cautious ahead of a pivotal speech by U.S. Federal Reserve Chair Jerome Powell, scheduled for later in the day. Attention was focused on Powell's address at the Jackson Hole symposium, which is expected to provide crucial insights into the timing of potential U.S. rate cuts.

Investor expectations are geared towards a 25 basis points cut in interest rates by the U.S. central bank in September. Emerging market currencies, particularly, are likely to react strongly to any monetary policy cues from Powell. The Turkish lira tumbled to a record low of less than 34 per dollar, with upcoming July foreign arrivals data set to reveal more about Turkey's economic stability and growth prospects.

Meanwhile, the South African rand appreciated by 0.5% against a weaker U.S. dollar ahead of Powell's speech. In Central and Eastern Europe, most currencies were stronger against the euro. Notably, the Hungarian forint inched up by 0.1% following a slight decrease in the country's unemployment rate to 4.2% for the quarter ending in July. Frantisek Taborsky, EMEA FX strategist at ING, noted, 'CEE is outperforming the emerging market space, and given the rather dovish market expectations in the region, CEE currencies should be supported and maintain at least current levels, with more gains later.'

MSCI's gauge for regional stocks was down 0.1%, reflecting losses from major index components like Taiwan Semiconductor and Tencent Holdings. However, Chinese stocks broke a three-session losing streak after the Commerce Ministry held discussions with automakers and industry associations about raising import tariffs on large-engined gasoline vehicles, potentially impacting the European Union as it considers tariffs on Chinese electric cars. Additionally, shares of South African gold mining company Gold Fields plummeted over 5% following a second annual output forecast cut this year, attributed to adverse weather conditions in Chile.

In Argentina, President Javier Milei plans to veto a pension reform passed by the Senate, a move expected to deepen the divide between the libertarian leader and the opposition-controlled Congress.

(With inputs from agencies.)