Emerging Market Currencies Rise on Japan


NEW YORK (TheStreet) -- Emerging market currencies were on the rebound Tuesday morning as risk appetite returned on better clarity of Japan's nuclear reactor situation and central banks around the world coordinated efforts to suppress the yen's rise.

The Chinese yuan was up 0.07% at 6.551. Earlier, the Chinese currency strengthened to a 17-year high against the dollar, reaching 6.5552 on chatter that China will be hiking interest rates and letting the yuan appreciate in order to cool inflation. The WisdomTree Dreyfus Chinese Yuan Fund ( CYB) was flat at $25.34.

The South African rand was gaining 0.6% against the U.S. dollar at $0.14446 as the Brazilian real rose 0.2% against the dollar at $0.5999, even amid rising inflationary pressures in Brazil. The WisdomTree Dreyfus ETF BZ Real Fund ( BZF) was flat at $27.

The rand advanced as South Africa's Reserve Bank reported that Africa's largest economy narrowed its current account deficit to 0.6% of gross domestic product in the fourth quarter from a revised 3.1% in the quarter before as platinum and coal exports strengthened.

Analysts surveyed by Reuters were expecting a deficit of 2.55%. The iShares MSCI South Africa Index ( EZA) was up 0.8% to $67.58.

"Risk sentiment has been stable in Asian hours, mainly as a reaction to more stable conditions at Japan's nuclear reactors and yesterday's constructive performance in U.S. stock markets," UBS foreign exchange strategist Manuel Oliveri had said in an early report.

Japanese workers who were forced to evacuate nuclear power plants at the height of the nuclear crisis when the facilities began emitting smoke, have returned to work to restart nuclear cooling systems.

Although there have been reports of radioactive contamination in Japan's seas, its government said they're haven't been at levels immediately threatening to humans. Still radiation has been found in tap water, spinach and milk and taken off the market.

The death toll from Japan's earthquake and tsunami has reached 10,000. Tens of thousands are still missing.

The Brazilian real was strengthening against the dollar even as the country battles rising inflation. Projections for Brazil's IPCA consumer price index have risen to 5.88% for 2011 from the previously expected 5.82%. Investors remain dubious about the ability of monetary policy tightening to curb inflation.

On Friday, central banks from the Group of Seven (G7) industrialized nations sold about 530 billion yen ($6.5 billion) to curb the currency's appreciation according to Japan's central bank. The currency had been appreciating amid a mass repatriation of funds in the aftermath of Japan's earthquake and tsunami.

Still UBS foreign exchange strategist Geoffrey Yu noted that evidence suggests the action wasn't enough to eradicate yen long clusters in the market.

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