NEW YORK: Traders are betting that emerging-market (EM) currencies will remain vulnerable into the new year, even as central banks from Moscow to Mexico City are set to push ahead with interest-rate hikes that theoretically should attract investors.

       MSCI’s emerging currency index remains 1.6% below a peak in June and few traders appear willing to stick their heads above the parapet as officials from at least 13 developing nations prepare to make monetary policy decisions in the coming days.

       A potentially seismic shift on policy from the Federal Reserve – which is considering whether to speed up its stimulus withdrawal – is also adding to the rocky landscape.

       A gauge of implied EM foreign exchange volatility jumped to the highest since March in recent weeks as twin concerns about accelerating inflation and the latest Covid-19 mutation spurred shifts by global investors.

       It jumped again on Monday by the most in 10 days ahead of the string of meetings. The index is close to its highs for the year.

       “Nobody wants to try to be a hero in December,” said Edwin Gutierrez, an investor at Aberdeen Asset Management in London. “Nobody wants to put on a lot of risk at year-end.”

       For now, developing-nation currencies will be left at the mercy of the Federal Reserve, US growth and global inflationary pressures.

       “You have a growth imbalance between whats happening in EM and what’s happening in the United States,” which can only favour the dollar, said Phillip Torres, global co-head of emerging market debt at Aegon Asset Management in Chicago.

       The World Health Organisation labelled Omicron a “variant of concern,” rattling global markets, late last month. The strain – which may be 4.2 times more transmissible than Delta, according to a Japanese study – is raising fears of measures that could hurt the fragile economic recovery in developing nations.

       Still, Chile is expected to deliver at least a full percentage point of tightening after the bank raised rates 125 basis points in October.

       Russia will likely join Chile with a full point increase on Friday, while Colombia is predicted to raise rates by a half point on the same day. Mexico may tighten by a quarter-point tomorrow, continuing the central bank’s slow-and-steady approach this year.

       According to Bloomberg surveys, central banks including Pakistan and Hungary are also expected to join the hiking cycle, while Taiwan, Indonesia and Egypt will probably keep rates on hold. — Bloomberg