(Bloomberg) — Emerging-market currencies were mixed on Thursday as the US Treasury’s announcement of increased bond buybacks was seen by many as a “temporary” measure, allowing the dollar to rebound.
The greenback index remained in positive territory even after Treasury Secretary Scott Bessent doubled down on the policy, saying Thursday that buybacks could amount to more than $4 billion per issue, further pressuring some Latin American currencies.
The Colombian peso fell 1%, ranking as the worst performer, while the Brazilian real retreated 0.3%. South Africa’s rand, often a measure of risk-appetite, also weakened against the dollar. The MSCI EM Currency index ended the session up 0.1% after end-of-day adjustments.
“The Treasury should not be in the business of trying to flatten the yield curve,” said Win Thin, chief economist at Bank of Nassau 1982. “I wonder whether Bessent played his hand too early. The markets now have a line in the sand that was drawn yesterday and they will surely test it.”
Elsewhere in foreign-exchange markets, Indonesia’s rupiah hit the strongest level in two months against the dollar. One potential equity-related headwind for the currency was delayed, with this week’s decision by FTSE Russell to defer stock index changes, according to Commerzbank AG. The Jakarta composite stock index was among the best performers globally on Thursday.
“FTSE may still cut the weighting of limited free-float stocks in September, but the decision delays risk of a downgrade to frontier market status for now,” Commerzbank economists Henry Hao and Moses Lim said in a report.
Meanwhile, the South Korean won was among the worst performers after hitting an 11-month high in the previous session. The country’s stock market rose for the first time this week, meanwhile, with the Kospi index posting the biggest daily advance this month.
Samsung Electronics Co. and SK Hynix Inc. supported gains in the MSCI’s emerging market equity gauge. The stock of Taiwan Semiconductor Manufacturing Co., another heavyweight in the index and a beneficiary of the artificial intelligence boom, also gained.
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