Zhixun Finance learned that emerging market assets rose on Monday, as investors cut positions betting on Trump's victory in the US presidential election. On the day before the US election, currencies in Mexico, South Africa, and Eastern Europe rebounded against the US dollar. The US election could reshape the global trade and investment flow patterns in the coming years. The MSCI Emerging Markets Forex Index rose by 0.2%, marking the largest increase in two weeks; markets in economies most sensitive to new export barriers and a strong US dollar saw the biggest gains on Monday, with the Polish zloty and Mexican peso both rising by 0.9%. Additionally, at the time of writing, the MSCI Emerging Markets stock index rose by 0.5%.

The rise in the MSCI Emerging Stocks Index was driven by a rebound in technology stocks after last week's sell-off. The stock price of chipmaker Taiwan Semiconductor (TSM.US) ended a four-day decline, recording its largest increase in two weeks.

Over the weekend, polls showed Harris leading in Iowa, a significant shift as Trump has won Iowa in every previous election. Bets on Trump's victory have supported the US dollar, as expectations of trade tariffs and inflation policies may compel the Fed to maintain a stricter monetary policy stance.

Brown Brothers Harriman strategist Elias Haddad said: "Polls have hit Trump's trades. Nevertheless, the presidential election will be a tense competition, and we may not know the winner until a few days later."

Fredrik Repton, Senior Portfolio Manager at Neuberger Berman responsible for global fixed income and currency markets, said that a Harris victory could lead to reduced volatility and lower risk premiums. Repton added: "In this scenario, if there is a divided US government, the Fed may not need to maintain a restrictive monetary policy, so in this case, we believe carry trades will come into play."

Repton points out that the Mexican peso and Brazilian real are attractive opportunities in this scenario. He said: "These currencies have been heavily sold off, providing significant carry trade opportunities." Carry trade refers to investors borrowing low-yielding currencies to purchase high-yielding assets.

In addition to political risks, investors are preparing for a series of central bank decisions this week that could magnify market volatility. Haddad said that due to the strong US economic conditions and supported by resilient consumer spending activity, it is widely expected that after a 50 basis point cut in September, the Fed will narrow the rate cut to 25 basis points this week. Furthermore, central banks in Eastern Europe, Poland, and Romania may keep borrowing costs unchanged, while policymakers at the Czech central bank seem prepared to extend the duration of rate cuts. Meanwhile, concerned about fiscal deterioration, the Brazilian central bank is expected to raise benchmark interest rates.

In addition, last week's data shows that investors are turning to Asian sovereign ​bonds to avoid the risks of the USA election, which has boosted markets already benefiting from billions of dollars of foreign inflows this year. Asset management companies such as Allianz Global Investors, Franklin Templeton, and Gamma Asset Management are bullish on government ​bonds of Asian countries. Expectations of rate cuts have boosted demand, they say that in the event of election-induced market panic, these ​bonds will become safe-haven assets.