(Bloomberg) -- Emerging-market currencies pared weekly losses and stocks posted their longest winning streak in more than two months as investors awaited potential signs of further stimulus from China and Friday’s US jobs report.
An MSCI Inc. gauge for developing-world currencies ended the day 0.1% higher Thursday. Assets held gains after US jobless claims rose to the highest in a month ahead of the monthly employment report, which may offer clues on the Federal Reserve’s interest-rate decision later this month.
If the report “shows strength we could be in for a hawkish cut or no cut,” said Brad Bechtel, global head of FX at Jefferies. “If it goes the other way, that will only act to drive the US dollar weakness we have seen start emerging.”
Equity Rally
Developing-nation stocks also advanced, with an MSCI gauge for emerging equities up for a fourth day, the best winning streak since September. Gains were led by shares in Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co. and SK Hynix Inc.
The advance has been largely fueled by hopes that China’s upcoming Central Economic Work Conference will bring decisive policy support to spur economic growth in 2025.
Deutsche Bank strategists said that they “anticipate significant fiscal stimulus will be announced in March 2025 alongside the annual budget,” including direct government spending, bank recapitalization, and additional support for the property sector, potentially boosting China’s nominal GDP growth by more than two percentage points in 2025.
Valuation Gap
The bounce also comes amid a widening gap between emerging and US stocks. An index for EM equities trades near its lowest-ever level relative to the S&P 500 Index since the late 1980s, data compiled by Bloomberg show.
It becomes “a bit of a no-brainer” to add exposure to the rest of the world as US valuations suggest more room for disappointment going forward, Gustavo Medeiros, head of research for Ashmore, said in an interview with Bloomberg TV Thursday. He added that emerging markets offer some of the cheapest opportunities across the globe on a historical basis.
“Dogecoin last night was trading at a $62 billion market cap — that’s is basically larger than many companies in Brazil,” Medeiros said.
Elsewhere, most currencies strengthened versus the dollar. The South Korean won was the worst performer among peers, plagued by political uncertainties. The country’s main opposition leader, Lee Jae-myung, said it might be challenging to gather enough support to impeach President Yoon Suk Yeol this week over his declaration of martial law.
El Salvador’s dollar bonds rose across the curve after Bitcoin jumped past the $100,000-mark on prospects for less regulatory risks in the crypto industry. The Central American nation has adopted Bitcoin as legal tender.
(Updates to market close. A previous version corrected date of Fed’s meeting in second paragraph, spelling in the last.)
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