(MENAFN- Gulf Times) Markets aren't generally accustomed to getting surprises from the Federal Reserve, but that's exactly what they got. The central bank's signal that there will be no rate increases through the rest of 2019 gave risk assets around the world a solid nudge higher, with emerging markets registering a string of superlatives.
The MSCI EM currency index, led by the rand, was at its highest level since the Argentine peso crisis of last June. Every major stock market except Malaysia's advanced, putting the MSCI share gauge on course for its fourth advance in five days. And an index of emerging-market domestic-currency bonds was at its strongest level since April.
The Fed's dovish stance now raises the likelihood that central banks across emerging markets will look to ease policy in the months ahead. Indonesia, among the more hawkish last year after governor Perry Warjiyo took the reigns, is a case in point, with both Goldman Sachs Group Inc and Morgan Stanley predicting rate cuts to come. The central bank left its seven-day reverse repurchase rate at 6% yesterday, but bonds and the rupiah took wind. For what it's worth, Fitch Ratings said Indonesia's current-account deficit will prevent policy makers from reducing rates through 2020.
Meanwhile the Philippines and Taiwan completed a quintet of on-hold central banks this week, leaving their benchmark rates unchanged. Policy makers in Brazil and Thailand did likewise on Wednesday. And Colombia, home to this year's best-performing stock market in dollar terms, is forecast to do the same today. All of which makes the next round of central bank meetings much more interesting, as the focus inevitably returns to the slowing global growth backdrop.
Turkey's lira was among the wall-flowers at yesterday's risk party, managing to weaken on a day when almost every one of its peers was appreciating. Bloomberg's emerging-markets team attributes the retreat partly to dollar-buying by locals following the currency's mini rally on Wednesday. But the notion that Turkey's central bank may join the global easing trend before it has fully got a hold of inflation can't be far from traders' minds. Russia provided further evidence of investor indifference to the sanctions threat hanging over President Vladimir Putin's government, putting the finishing touches to a twin sale of dollar-and euro-denominated bonds yesterday. Perhaps that indifference isn't surprising in light of the rouble's world-beating-performance this year, Russia's relatively high yields, an investment-grade credit score and almost half a trillion dollars of foreign-currency reserves.
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