EMERGING MARKETS – Fueled hammer weighs heavy in emerging markets; Turkey cenbank eyed


* Turkish lira down ahead of c.bank decision at 11:00 GMT

* Russian ruble increases after Biden-Putin meeting

* Emerging equity index at three week low

June 17 (Reuters) – An emerging market currency index was heading for its worst day in more than a year on Thursday, hit by the rising dollar after the US Federal Reserve advanced its schedule to tighten policy.

The Fed said it plans to start tightening in 2023, a year ahead of schedule, recognizing in a way that inflation may be sustainable rather than transient.

Debt spreads on the Emerging Bond Index narrowed to 326 basis points – from levels last seen in February 2020, while the MSCI Emerging Currency Index fell 0.7%, its biggest daily drop since the pandemic rocked markets in March 2020.

Analysts have predicted winners and losers in emerging markets from the Fed’s policy shift.

“Asian markets are less exposed than other emerging regions to changes in Fed policy and fluctuations in US bond yields,” said Mitul Kotecha, TD Securities strategist.

Since higher U.S. interest rates tend to tarnish the attractiveness of emerging market assets, investors will want to see whether central banks in developing countries act to preserve the yield premium of their own currency against the market. dollar.

The Indonesian rupiah fell 0.7% earlier today as the central bank held down rates, while the Brazilian real is expected to get some support after the 75 basis point interest rate hike Wednesday.

All eyes are now on Turkey, where President Tayyip Erdogan’s demands for lower interest rates, despite 17% inflation, have systematically undermined the lira.

The lira fell to around 8.6 per dollar as the central bank is expected to postpone any cut to the fourth quarter of 2021, leaving the key interest rate at 19% on Thursday.

The Russian ruble, however, strengthened 0.2%, leveling off after a four-game losing streak before a meeting between Presidents Vladimir Putin and Joe Biden on Wednesday.

The two leaders agreed to start talks on cybersecurity and arms control at a summit that highlighted their disagreement on these issues, human rights and Ukraine.

In equity markets, the emerging MSCI stock index fell 0.6% to a three-week low, although a positive end for Chinese stocks capped the index’s losses.

For the CHART on emerging market foreign exchange performance in 2021, see tmsnrt.rs/2egbfVh For the CHART on the performance of the emerging MSCI index in 2021, see tmsnrt.rs/2OusNdX

For TOP NEWS in emerging markets

For the CENTRAL EUROPE market report, see

For the TURKISH market report, see

For the report on the RUSSIAN market, see

Reporting by Susan Mathew in Bangalore; Editing by Sujata Rao and Shailesh Kuber


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