Geopolitical Tensions Rattle Emerging Markets

Emerging market currencies experienced declines as global geopolitical tensions heightened, including uncertainty around U.S.-Iran talks and Russia-Ukraine negotiations. Amidst mixed performances in regional stock markets, there were declines in South Africa's rand and Turkey's stocks while South Korean stocks achieved record highs. IMF projections for China's GDP remain steady.

The landscape for emerging market currencies dimmed as investors grappled with renewed geopolitical tensions globally. The MSCI index, tracking these currencies, dipped by 0.2%, its lowest in over a week, while the stocks gauge remained flat.

This week saw EM assets confined within a limited range due to closed markets across several Asian countries for Lunar New Year holidays. Meanwhile, rising geopolitical tensions, such as developments in U.S.-Iran talks and the Russia-Ukraine conflict, carried implications for the global oil market.

In South Africa, the rand retreated further, reinforcing a trend of decline observed over four consecutive sessions, while broader market stock gains cushioned losses in the precious metals sector. Elsewhere, Turkey's lira stayed stagnant, and most emerging European currencies showed little movement against the euro.