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2025-07-31 17:45:09
Emerging Market Currency Markets Under Pressure: Tariffs Cast a Shadow, and South Africa's Rate Cut Uncertain! ⑴ Most emerging market currencies and stocks fell on Thursday as the market digested further rhetoric regarding US tariffs, while also focusing on US economic data and central bank decisions. ⑵ Market sentiment was significantly impacted by Trump's tariff rhetoric as the August 1 tariff deadline approached. ⑶ The US reached bilateral trade agreements with South Korea and Pakistan late Wednesday, imposing a 15% tariff on South Korea, lower than the previously threatened 25%, prompting a slight appreciation of the Korean won by 0.2%. ⑷ Trump also exempted some Brazilian goods from tariffs, but eliminated exemptions for small imports. ⑸ Federal Reserve Chairman Powell kept interest rates unchanged at Wednesday's meeting, dampening market expectations for a September rate cut. The US dollar index remained flat, giving up earlier gains. ⑹ The market's index tracking emerging market currencies fell 0.3%, and is on track to post a monthly decline due to tariff uncertainty and the US-EU trade agreement supporting the dollar. ⑺ The South African rand fell 0.4%, with the market generally expecting the South African Reserve Bank to cut interest rates by 25 basis points. ⑻ Economists at Societe Generale said this may be the last rate cut by the South African Reserve Bank in the near future, aimed at maintaining a high real interest rate buffer to achieve a lower inflation target. ⑼ The market is closely watching key US inflation data for clues about the effect of tariffs on prices. ⑽ Investors are closely watching any progress in trade negotiations between the United States and its trading partners, hoping for further concessions that would indicate a softening of the US tariff stance, thereby helping emerging markets continue to rise.
