These 3 emerging market currencies have defied gravity

Emerging market (EM) currencies have done well in the past few weeks even as global risks have jumped. They have also outperformed their peers in the emerging markets as the Fed vows to keep hiking interest rates. Here are some of the top EM currencies to trade.

South African rand

The South African rand has bucked the trend this year. In this period, the USD/ZAR pair has slipped by over 10%, making it one of the top currencies in the world. This performance has been helped by the hawkish South African Reserve Bank (SARB), which has become more hawkish. 

At the same time, the country’s economy has benefited as demand for its top commodities like gold, platinum, and palladium has risen. The USD/ZAR pair has moved below the 50% Fibonacci retracement level and the 25-day and 50-day moving averages. Therefore, the pair will likely keep falling in the coming days.

Brazilian real

The Brazilian real has also been in a deep upward trend in the past few months. The USD/BRL pair has crashed to a low of 4.6575, which is the lowest it has been since 16th March 2020. It has dropped by about 20% from its highest point in 2021. This makes the real one of the best EM currencies.

The real has benefited from the extremely hawkish central bank that has raised interest rates multiple times in its bid to fight inflation. 

At the same time, like South Africa, the country has benefited from the ongoing commodity prices. Brazil’s top commodities like soybeans, iron ore, oil, and sugar have all risen sharply as the crisis in Ukraine has continued. 

The USD/BRL pair formed a triple-top pattern on the weekly chart. It also managed to move below the important support level at 4.89, which was the lowest level on June 2021. Therefore, there is a likelihood that it will keep falling in the near term.

Russian ruble

The Russian ruble is another emerging currency to buy despite the ongoing crisis in Ukraine. The USD/RUB has crashed to a low of 84, which is about 30% below its all-time high. This performance has happened because of the actions by the Russian government and the central bank.

In response to growing sanctions, the Russian government has announced that it will only accept rubles for gas and other products. The central bank has also raised interest rates and made measures to prevent capital outflow. Therefore, there is a likelihood that the USD/RUB will continue falling.