Emerging Markets Brace for Steady Rates Amid Fed's Cautious Stance

Emerging market currencies remained steady against the dollar following the U.S. Federal Reserve's decision to maintain interest rates. The Fed indicated no immediate plans to cut rates, affecting market expectations for 2025. Meanwhile, emerging European currencies steady ahead of the ECB’s expected rate cut.

On Thursday, emerging market currencies showed relative stability against the dollar. The U.S. Federal Reserve's recent decision not to rush into rate cuts reinforced expectations of continuing high rates in the world's top economy.

MSCI's index, which tracks global emerging market currencies, saw a marginal dip of 0.1%. Trading volumes were low as several Asian markets were closed due to the Lunar New Year. The Fed's steady rates, as confirmed by Chair Jerome Powell, indicate no imminent cuts are expected, barring significant changes in inflation and employment data.

In Europe, emerging currencies held steady against the euro as the European Central Bank prepared for a widely anticipated 25 basis point rate cut. ING analysts noted minor pressure on emerging markets' currencies due to the Fed's hawkish tone, though confidence remains intact.

(With inputs from agencies.)