EMERGING MARKETS-EMEA currencies tick lower in risk-off trade; stocks edge up

EMEA currencies have traded rangebound in recent weeks, with investors seeking better returns in stocks due to lower borrowing costs and concerns over economic strength in the region. For instance, Turkey's lira was muted for the day, having barely moved 0.1% in either direction over the past two weeks.

Most emerging market currencies moved lower on Wednesday as safe-haven demand pushed up the dollar, while concerns over rising coronavirus cases capped gains in equities. Weak oil prices continued to pressure Russia's rouble , while its peers in Europe, Africa and the Middle East edged lower.

Central European currencies such as the Hungarian forint and the Czech crown fell to the euro after disappointing industrial output data on Tuesday. With COVID-19 cases rising exponentially in the United States, as well as in developing economies such as India and Brazil, investors pivoted to the dollar on the possibility of new lockdown measures against the pandemic.

The caution saw most emerging market stocks and currencies come off a nearly week-long rally spurred by positive economic readings from the developed world. "It seems that following a decent winning streak, some investors may have taken the opportunity to lock some profits," Charalambos Pissouros, senior market analyst at JFD Group, wrote in a note.

"Until we see more lockdown measures being reintroduced around the world, we would treat yesterday's slide as a corrective retreat", he wrote, adding that better-than-expected economic data would set the stage for more risk-on sentiment. EMEA currencies have traded rangebound in recent weeks, with investors seeking better returns in stocks due to lower borrowing costs and concerns over economic strength in the region.

For instance, Turkey's lira was muted for the day, having barely moved 0.1% in either direction over the past two weeks. Concerns over spiking inflation have clouded the lira's outlook. Turkish stocks edged up for the day. Still, broader EMEA equities were a mixed bag, with Russian markets retreating, while central European stocks moved in a flat-to-low range.

The MSCI's index of developing world stocks rose about 0.8%, supported largely by a continued bull run in Chinese stocks. South Africa's rand outperformed its EMEA peers, recovering from its worst session in nearly three weeks.

For GRAPHIC on emerging market FX performance in 2020, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see https://tmsnrt.rs/2OusNdX For TOP NEWS across emerging markets

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