Tuesday, 20 Oct 2020

EMERGING MARKETS-EMEA FX gains, Russia's rouble among top weekly performers

* Russia’s rouble set for best week since June

* Turkish lira gains after cenbank raises swap rates

* Chinese yuan surges as mkts reopen after long holiday

Oct 9 (Reuters) – Most emerging market currencies in EMEA were set for mild weekly gains on Friday, while an index of developing world stocks hit its highest level in nearly five weeks on continued bets of fresh U.S. stimulus measures.

Russia’s rouble rose 0.3% and was set for its best week in more than four months, outperforming most of its peers for the week as it recovered from recent weakness on a bumper gain in oil prices.

Political unrest in Kyrgyzstan, turmoil in neighbouring Belarus, a military conflict in the South Caucasus and the suspected poisoning of Kremlin critic Alexei Navalny have all pressured the rouble.

Russian stocks fell, while MSCI’s index of emerging market equities rose 0.4% to its highest level since early September.

Overnight, U.S. stocks ended higher after comments from the U.S. president fuelled hopes of fiscal support.

Chinese stocks also rallied as markets reopened after an extended national holiday, while the yuan marked its best day since 2005, when Beijing de-pegged its currency from the greenback.

Turkish stocks rose 0.5%, while the lira recovered slightly from its record low after the central bank raised interest rates in the lira swap market to 11.75% from 10.25%.

“Positive move, (it) shows authorities kind of get the importance of rebalancing. Question whether this is enough or too little, too late,” said Timothy Ash, a senior emerging markets sovereign strategist at BlueBay Asset management.

The lira was set to post a sixth straight weekly drop. It has come under pressure due to geopolitical tensions around Turkey, as well as doubts over its fiscal strength.

“We now move on to this latest leg of lira depreciation as a continuation of the pre-existing trend – let us see what policymakers next have in store after the surprise 200bp rate hike of last month,” Tatha Ghose, FX & EM analyst at Commerzbank, wrote in a note.

Hungary’s forint firmed slightly against the euro after the country posted a much larger-than-expected foreign trade surplus in August.

For GRAPHIC on emerging market FX performance in 2020, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see tmsnrt.rs/2OusNdX

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