Emerging Markets May Draw More Investor Money After U.S. Treasury Buyback Plans Weaken Dollar, Analysts Say

According to CNBC, analysts said emerging markets are likely to attract more investor money after U.S. Treasury bond buyback plans weakened the dollar. U.S. Treasury Secretary Scott Bessent doubled planned buybacks of longer-dated U.S. government debt last month to ease pressure on long-term yields, and Robin Brooks of the Brookings Institution said markets are looking for places to "ride out the debt bonanza." Brooks said emerging markets are expected to see a "wall of money" as some developed economies try to lower longer-dated government bond yields, supporting carry trades that borrow in a cheap currency to buy higher-yielding assets. Global emerging market bond funds took in $967 million in the week to Wednesday, up about 15% from the previous week, even as overall bond fund inflows slowed, according to TD Securities data. Gold also gained after Bessent's intervention, with Deutsche Bank and Bridgewater Associates founder Ray Dalio among those backing the metal. Peter Kinsella, global head of FX strategy at Union Bancaire Privee in London, said the Treasury's announcement suggested the U.S. could potentially pursue policies similar to financial repression, which weakened the dollar and helped high-yielding G10 and emerging market currencies. The South Korean won has strengthened 2.83% against the dollar since the announcement, while the Brazilian real gained 0.64% and the South African rand 0.59%.