Aurelia Butler

NEW YORK (Reuters) – Foreign investors added $273.5 billion to their emerging market equity and debt portfolios last year, nearly $100 billion more than in 2023, according to a bank trade group’s preliminary data published on Friday.The $273.5 billion of inflows for 2024 topped the $177.4 billion in 2023 though it was below the $375 billion average between 2019-2021, according to the report from the Institute of International Finance.Almost all the inflow was money put into fixed income last year with $219 billion added to debt outside China and $54.2 billion to Chinese debt. The picture was more split in stocks, where Chinese equities raked in $11.3 billion while those elsewhere in the developing economies world lost $11 billion, the data show. U.S. growth and the strength of the dollar were headwinds to investing in emerging markets most of the year, and the Federal Reserve itself has downgraded its expectations for rate cuts in 2025 – which in turn provides yet more support to the dollar. Signs of a looser monetary policy in the U.S. would be supportive of EM assets in general.”Throughout 2024, the strong dollar and elevated U.S. yields created significant headwinds for EM equities and certain debt markets, a trend that may reverse if the Fed begins signaling rate cuts in the coming months,” said IIF economist Jonathan Fortun in a statement.”While Fed dovishness would provide a much-needed tailwind, sustained recovery in EM equities will likely require further clarity on global growth prospects and targeted policy measures in key markets like China,” he said.JPMorgan warned on Thursday of a sudden stop of flows to emerging markets as a strong U.S. economy keeps investors away from developing nations seen as riskier.Yet idiosyncrasies will continue to dictate flows, as seen by equity inflows in December to India, Brazil, Saudi Arabia and Taiwan. The breakdown of IIF data by month showed non-residents added a net $14.4 billion to emerging market portfolios in December, with stocks posting net overall outflows.Regionally, Latin America led inflows with $6.6 billion followed by Emerging Asia with $5.3 billion, while Africa and the Middle East, and Emerging Europe pulled in $1.7 billion and $1.1 billion respectively. More

BUENOS AIRES (Reuters) – Brazil’s central bank will raise its benchmark interest rate by 100 basis points on Jan. 29, with more to increases follow, taking the cost of borrowing to the highest in nearly two decades by mid-year, a Reuters poll showed.The expected increase on Wednesday, firmly signalled by policymakers in recent weeks, would be Banco Central do Brasil’s (BCB) second full percentage point rise after it surprised the markets in December with an increase of that size.As concern mounts in many countries over inflation, Brazil’s rates are now expected to end significantly higher than thought just once month ago.This month’s decision will be the first under newly-appointed bank governor Gabriel Galipolo, who faces rising domestic challenges as well as heightened global volatility.Brazilian policymakers, known as Copom, are expected to raise the benchmark Selic by 100 basis points more to 13.25% from 12.25% on Jan. 29 in view of inflation expectations, according to the median estimate of 38 economists polled Jan. 21-24.Apart from its importance to Latin America’s No.1 economy, Brazil’s Selic has gained relevance as a guide for global monetary policy trends, potentially giving an indication of the future direction of U.S. rates.The BCB first hiked the Selic in March 2021 from a low during the pandemic, preceding a similar shift in the United States by a year. Then, it began easing in August 2023 – again, a little more than a year ahead of the start of the Federal Reserve’s latest rate cuts.THIRD 100 BPS INCREMENT EXPECTEDAll 30 economists who answered extra questions on the bank’s next move said they expected a third 100 basis points increment in March to 14.25%, the highest since Sept. 2016. No Copom meeting is scheduled in February.”BCB has already made clear in its guidance the need to raise the Selic rate by at least another 200 basis points, with 100 basis points coming at the January meeting and 100 more in March,” said Tomas Goulart, economist at Novus Capital.The median forecast from the poll shows the Selic rate peaking at 15.00% next quarter. That would be the highest since June 2006, when it stood at 15.25%.In a December poll, the Selic had been expected to peak at 13.50% in the second quarter, slightly below its 2023 peak of 13.75%.Consumer prices in Brazil are forecast to rise an annual 5.08% at the end of 2025 in the latest weekly survey by the central bank among private economists, advancing further above an official inflation target of 3% +/- 1.5 percentage points.Novus Capital’s Goulart was one of the economists to foresee a bigger inflation challenge for the central bank. “In order for inflation projections to converge, the Selic rate needs to reach at least 15.75% under current conditions, and Copom is saying it will do everything it can to make this happen,” Goulart said.(Other stories from the Reuters global economic poll) (Reporting and polling by Gabriel Burin in Buenos Aires; editing by Barbara Lewis (JO:LEWJ)) More

It held interest rates at 21% in December, surprising the market which had been bracing for another hike to as high as 23%. Inflation in 2024 was the fourth highest rate in the last 15 years at 9.52%, compared to 7.42% in 2023 and well above the bank’s 4% target. The central bank’s survey of almost 15,000 companies showed that businesses, when forming plans for 2025, accounted for annual inflation of 10.7% on average. Credit conditions remained tight in January, the report said, and the central bank said it would take elevated inflation expectations into account when it next meets to set rates on Feb. 14. Companies’ expectations for the change in prices of their goods over the coming three months remained steady in January after rising for four consecutive months, the survey showed. The central bank also said that its business climate indicator was at its lowest monthly level in January for two years. More

SINGAPORE/GDANSK (Reuters) -The dollar fell on Friday, on track to log its worst week in more than a year, after U.S. President Donald Trump suggested a potentially softer stance on tariffs against China which added to uncertainties around U.S. trade policies.The yen pared initial gains against the dollar after the Bank of Japan hiked rates on Friday and revised up its inflation forecasts, but offered few clues on the timing and pace of future rate hikes.Investors have sold the dollar in the wake of Trump’s inauguration after his widely expected tariff announcements did not immediately materialise, unlike his threats during his campaign.In an interview with Fox News that aired on Thursday evening, Trump said he would rather not have to use tariffs over China and that he thought he could reach a trade deal with the world’s second-largest economy.”This seems to feed into the growing sense that Trump is underdelivering on protectionism compared to pre-inauguration remarks, and that ultimately some of those tariff threats may not materialise as long as some concessions are made on trade,” said Francesco Pesole, currency strategist at ING.The Chinese yuan got a lift on the back of Trump’s remarks, with the onshore unit rising to its strongest level in eight weeks at 7.2370 per dollar.The U.S. president also said on Thursday that he wants the Federal Reserve to cut interest rates. Trump’s remarks came just days before the Fed’s first policy meeting to be held during his administration, with very broad expectations officials will leave rates unchanged.The dollar index, which measures the greenback against a basket of currencies, was on track for its biggest weekly fall since November 2023, set to lose more than 1.6% on the week. The index hit a one-month trough of 107.27 on Friday, and was last down 0.5% at 107.6.The euro, meanwhile, was up 0.65%, having touched its highest since Dec. 17 at $1.0515. The single currency was headed for a roughly 2% weekly gain.Data showed on Friday that euro zone business began the new year with a modest return to growth, as stable services activity in January was complemented by an easing of the long-running downturn in manufacturing.Sterling advanced 0.5% to $1.2417 and was similarly poised for a rise of 2% for the week, snapping three straight weeks of losses.BOJ HIKESThe Bank of Japan raised rates by 25 basis points at the conclusion of its two-day policy meeting, in a move that had been well telegraphed by policymakers prior to the outcome.The yen rose to 154.845 per dollar following the policy decision, but pared gains after Governor Kazuo Ueda’s press conference, where he said that a rise in underlying inflation was “moderate” and the central bank was not “seriously behind the curve”, suggesting no rush to tighten policy again.The yen was last unchanged at 156 per dollar.”There’s more than just the Japanese economy and wages that determine when the next BOJ rate hike can come, and the global uncertainties from Fed’s slowing rate cuts and the risk of tariffs in the new Trump administration remain out of Ueda’s control,” said Charu Chanana, chief investment strategist at Saxo. Earlier on Friday, data showed Japan’s core consumer prices rose 3.0% in December from a year earlier to mark the fastest annual pace in 16 months.In cryptocurrencies, bitcoin was last 2.2% higher at $105,435.Trump on Thursday ordered the creation of a cryptocurrency working group tasked with proposing new digital asset regulations and exploring the creation of a national cryptocurrency stockpile, making good on his promise to quickly overhaul U.S. crypto policy. More