EMERGING MARKETS-Lira slips ahead of c.bank decision; Hungarian stocks tumble

Emerging market currencies slipped on Thursday, with the Turkish lira extending losses ahead of a central bank rate decision, while Hungary's blue-chip stocks tumbled on the government's plan for windfall taxes on "extra profits" of companies. The lira edged lower ahead of a central bank decision at 1100 GMT where it is expected to hold its benchmark rate at 14% despite soaring inflation, depleted FX reserves and a protracted currency decline.


Reuters | Updated: 26-05-2022 14:38 IST | Created: 26-05-2022 14:35 IST
EMERGING MARKETS-Lira slips ahead of c.bank decision; Hungarian stocks tumble
Representative image Image Credit: Wikimedia

Emerging market currencies slipped on Thursday, with the Turkish lira extending losses ahead of a central bank rate decision, while Hungary's blue-chip stocks tumbled on the government's plan for windfall taxes on "extra profits" of companies.

The lira edged lower ahead of a central bank decision at 1100 GMT where it is expected to hold its benchmark rate at 14% despite soaring inflation, depleted FX reserves, and a protracted currency decline. "Inflation is eroding their competitiveness," said Jakob Christensen, chief analyst at Danske Bank.

"They are playing with fire doing this and we are getting increasingly nervous about the lira weakening from here. This would entail a fiscal cost for the Turkish government as well, given its FX guarantee scheme." Russia's rouble fell 2.6% against the dollar after the central bank cut its key interest rate to 11% from 14% at an off-schedule meeting and said it saw room for more cuts this year, as inflation slows from more than 20-year highs and the economy is about to contract.

"The central bank's decision to lower it to 11% is maybe a little bit premature, but overall, given that inflation is coming down quite rapidly, it is not surprising me that the market is not too alarmed about this," said Christensen. Emerging market currencies slipped 0.2%, and have fallen 2.6% so far this year on fears of aggressive monetary policy tightening from the U.S. Federal Reserve, a stronger dollar, and surging oil and food prices, particularly for nations highly reliant on imported raw materials.

Stocks inched 0.1% down. In central Europe, Hungary's stocks tanked near 5% after Budapest said it would impose windfall taxes on banks' and companies' "extra profits" to plug a budget gap.

The Hungarian forint fell 0.5% against the euro, leading to declines among its regional peers. The South African rand edged lower after minutes on Wednesday from the Fed's most recent meeting signaled that the world's most influential central bank was likely to stay the course on interest rate hikes.

China's yuan weakened past a key threshold of 6.7 per dollar, pressured by investor worries about a prolonged economic slowdown after Premier Li Keqiang held a rare high-profile meeting to support the economy. 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 For the CENTRAL EUROPE market report, see

For the TURKISH market report, see For the RUSSIAN market report, see

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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