It was a glass-half-full kind of day, but little beyond the resumption of the U.S.-China trade talks to justify even tentative gains. The Turkish lira continued to defy gravity by notching up a fifth straight gain in the wake of last week’s rate cut, with the Philippine peso and Thai baht in its slipstream. South Korea’s Kospi led gains in Asian stocks, though the markets of East Europe couldn’t sustain the advance as weaker corporate earnings and slower-than-forecast growth from France damped sentiment. Yield spreads on sovereign dollar bonds were an average of 2 basis points higher, according to JPMorgan Chase & Co.’s EMBI+ Index.

Fed Disappointment Risk

The risk for emerging markets now is that the Federal Reserve delivers a 25 basis-point cut tomorrow without signaling much else. Given a reduction of that magnitude is all but priced in, there’s a very real danger of a shrug-of-the-shoulders-type sell-off. It’s a point made in a note today by Jason Daw, a Singapore-based strategist at Societe Generale. In fact, Daw goes further, saying even a 50-point cut will probably trigger nothing more than a temporary bounce. The take-away, then, is that the dollar’s haven status is safe for now.

Eskom Again

Whatever love there was for emerging-market currencies didn’t find its way to South Africa. The rand slipped as much as 0.4%, more than any of its peers, as investors braced for an earnings release from Eskom Holdings SOC Ltd. that’s forecast to show a record loss. The logic is that the worse the loss is, the more cash President Cyril Ramaphosa’s government will pump into the state company just to keep the lights on. Given it’s money South Africa can barely afford, it beggars the question how long Moody’s Investors Service can keep the nation’s debt above junk, a view that looks increasingly at odds with those of the ratings company’s biggest peers. If or when the downgrade comes, South African bonds and the rand are in for a nasty jolt. No wonder foreigners are pulling their cash out of the country at a record pace, as reported by Bloomberg editor Paul Wallace yesterday.

AMLO Wish

The Mexican peso managed to find its footing after a brief dive yesterday as President Andres Manuel Lopez Obrador said he would like to see the central bank cut interest rates. It recovered later and was little changed today. In an interview with Bloomberg’s Editor-in-Chief John Micklethwait, the Mexican leader said lower rates are needed to revive the economy. It was his first comment on the country’s borrowing costs since taking office last year, though he stressed he respected the central bank’s independence. A Fed cut tomorrow would of course be just the encouragement Banxico needs to grant Lopez Obrador his wish without eroding the carry appeal that’s made the peso the third-best performing emerging-market currency this year.