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EMERGING MARKETS-FX mixed as rouble extends gains, lira dips again

By Reuters_News


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Turkish lira banknotes are seen in this illustration taken in Istanbul, Turkey November 23, 2021.
Turkish lira banknotes are seen in this illustration taken in Istanbul, Turkey November 23, 2021.

By Bansari Mayur Kamdar

- Emerging market currencies edged higher on Wednesday, with the Russian rouble extending gains to a four-year high against the dollar, while the Turkish lira dipped again ahead of an interest rate decision later this week.

The Russian rouble RUBUTSTN=MCX firmed past 56 against the dollar, a level not seen since 2018, helped by export-focused companies selling foreign currency to pay taxes and traders shrugging off the expiry of a key debt payment licence. RU/RUB

The Russian central bank said inflationary expectations among households fell to 11.5% in May from 12.5% in April, giving it more reasons to cut the key rate from 14% to provide the country's shrinking economy with cheaper lending. nR4N2WX02N

The central bank announced a rate-setting meeting on Thursday after slashing rates twice by 300 basis points since an emergency hike in late February to 20%. nL5N2XH1DS

"The main reason for rouble's appreciation is capital controls and the requirement that gas importers in Europe pay in roubles rather than in dollars," said Per Hammarlund, chief emerging market strategist at SE.

"They will cut the rate tomorrow to potentially 12% in an attempt to give incentives to households to switch over some of their roubles to dollars but it's going to have a minor impact."

Meanwhile, Turkey's lira TRY= extended losses to near 16.2 against the dollar, touching its weakest level since December, as bankers questioned the ability of authorities to steady the currency without new sources of foreign currency. nL5N2XH1EE

"You cannot have a strong export sector if you have high inflation and an unstable currency. If you're going to stay competitive you need to bring down inflation or the exchange rate needs to weaken," said Hammarlund.

"People are realizing this and putting pressure on the lira."

The cost of insuring Turkey's debt against default shot to its highest since the 2008 global financial crisis on Tuesday.

Currencies in central Europe were mixed, with the Polish zloty EURPLN= up 0.1% against the euro after data showed unemployment rate fell to 5.2% in April compared with 5.4% in March. nS8N2WJ05A

Hungary's forint EURHUF= fell 0.4% despite the central bank saying the country's banks are resilient even if geopolitical tensions prevail longer due to the Ukraine war. nS8N2WO0GP

The South African rand ZAR= slipped as the dollar =USD bounced ahead of the release of U.S. Federal Reserve minutes of its last meeting. nL2N2XH0E2

China stocks rebounded from their worst session in nearly three weeks on the back of Beijing's economic support measures. .SS

 

 

 

For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh

 

For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX

 

For TOP NEWS across emerging markets nTOPEMRG

For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

 

(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Krishna Chandra Eluri)

((BansariMayur.Kamdar@thomsonreuters.com))

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