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(Bloomberg) -- Currencies from developing nations scored the best day in over two weeks as President Donald Trump’s tariffs sent the greenback plunging and emerging stocks slid as his steep levies reverberated across Asian markets.
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The MSCI index for emerging-market currencies ended Thursday with a 0.1% gain as the dollar tumbled. The Mexican peso rose as much as 1.8% after the country continued to have exemptions from levies on imports in the free-trade agreement with the US. Brazil’s real and Chile’s peso also outperformed peers.
“Most of EM will do well against a weaker dollar, especially LatAm, as the strategic beneficiary of the tariff mix,” said Alvaro Vivanco, head of strategy at TJM FX. “I expect rates across the board to continue to decrease. It feels like the market will need some time to digest the growth versus inflation hit, but for the rest of the world this is disinflationary.”
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The Bloomberg dollar index was down about 1.5% in its worst day since November 2022 amid concern Trump’s trade policies will dent US growth. Traders are starting to price in that the Federal Reserve will cut rates four times by year-end.
Currencies from Eastern Europe led emerging-market gains against the dollar, mirroring the euro’s rise, though they declined versus the single-bloc currency.
Asia Hit
Asian markets took a hit after being heavily targeted by Trump’s levies. Total tariff rate against Chinese goods will rise to 54%, the US said Wednesday, sending the Chinese yuan down as much as 0.5% as one of the worst performers among peers.
On Thursday, China’s credit score was downgraded by Fitch Ratings to A from A+ with a stable outlook, citing continued weakening of public finances and a rapidly rising public debt trajectory.
Some of the poorest countries were punished for their trade imbalances with the US. The Thai baht dropped as the country faces a 36% levy on its exports. Vietnam saw stocks tumble more than 6% after being slapped with a 46% duty. Dollar bonds in Sri Lanka slumped, leading EM losses after the US announced a reciprocal tariff of 44%.
The focus on Asia also reverberated strongly across the stock market. The benchmark for developing-world stocks closed the day 0.8% lower, driven by slumps in Chinese shares. Consumer discretionary and financial shares were the worst-performing sectors in the region.