EM Currencies Pause Amid US Holiday Calm

Emerging market currencies experienced a brief respite from their recent upward trend on Thursday. Trading volumes were notably low as markets observed the Thanksgiving holiday in the United States, leading to a general stabilization across various developing economies. While the overall emerging market sentiment remained cautiously optimistic, Latin America's performance lagged behind other regions, marking a reversal for currencies like the Chilean peso and Colombian peso.

This pause in currency movements did not significantly alter the prevailing bullish outlook for emerging market assets this year. Analysts at JPMorgan Chase & Co. highlighted that emerging market fundamentals appear strong, with low repayment risks anticipated for most sovereigns through 2026. This assessment is supported by historical data indicating that emerging market sovereign spreads are currently at levels not seen since before the 2008 financial crisis.

In specific market movements, the South Korean won appreciated following a statement from the Bank of Korea, while the onshore yuan's four-day gain halted after the central bank set a weaker currency fixing. The focus remains on future Federal Reserve policy, with markets largely pricing in an 80% chance of a December rate cut, suggesting limited further upside for the US dollar in the near term.