EMERGING MARKETS-Russian rouble, S.African rand firm 1% as dollar retreats from highs
The currency had fallen steeply on Friday amid tensions between Russia and Ukraine that also hurt Russian bonds and stocks. South Africa's rand firmed around 1%, ahead of domestic inflation data and a monetary policy meeting of the South African Reserve Bank's (SARB) due on Thursday.
Most emerging market currencies gained on Monday, led by South Africa's rand and Russia's rouble, after the dollar slipped from its 16-month peaks as investors awaited fresh clues on U.S. monetary policy. The rouble firmed by 1.2%, and was set to enjoy its best day in over three weeks despite weakening oil prices. The currency had fallen steeply on Friday amid tensions between Russia and Ukraine that also hurt Russian bonds and stocks.
South Africa's rand firmed around 1%, ahead of domestic inflation data and a monetary policy meeting of the South African Reserve Bank's (SARB) due on Thursday. The SARB is expected to hold its repo rate at 3.50%.
The dollar eased back from near an almost 16-month high versus major peers, as traders await fresh clues on the U.S. economy after soaring inflation numbers led investors to pull forward their Federal Reserve rate hike bets. Turkey's lira extended losses to a fifth straight session having breached the psychological level of 10 per dollar on Friday. It hit its lowest of 10.04 in early trade on Monday.
The Turkish central bank is expected at its next policy meeting on Thursday to cut rates by a further 100 basis points despite soaring inflation, a move that would further pressure the currency. "Turkey is hit by a perfect storm of Fed tightening, a stronger dollar and higher oil prices. We have been very bearish on the lira as we see no policies in place to tackle the economic pressures and, with them also cutting rates again, it is an economic suicide," said Jakob Christensen, head of EM research at Danske Bank.
Turkey's benchmark stock index surged 3.2% to record highs, led by gains in lender Garanti BBVA, which jumped 10% after Spanish lender BBVA's 2.25 billion euros ($2.58 billion) offer for a 50.15% stake it does not own. MSCI's index of EM stocks rose 0.3%, in a sixth straight session of gains - its longest winning streak since early June. Sentiment from upbeat industrial output and retail sales for China were offset by the embattled property sector. Mainland China shares lost but this was outweighed by strong tech gains in Taiwan and South Korea.
South African drinks maker Distell Group Holdings dropped over 7% after Heineken's 40.1 billion rand ($2.62 billion) offer represented a discount to Distell's last close. Poland's Central Bank Governor Adam Glapinski said in an interview that rates there were likely to be hiked, prompting a 0.6% jump in the zloty against the euro. It had previously plumbed seven-month lows amid a migrant crisis on its border with Belarus that has increased regional tensions.
Argentine markets were also in focus after the ruling Peronists suffered a setback in mid-term elections over the weekend. Telecom Argentina's Frankfurt listing slid 3.4%. For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see https://tmsnrt.rs/2OusNdX
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