EMERGING MARKETS-Currencies drop as dollar gains, U.S.-China tensions weigh

PUBLISHED: Fri, 18 Dec 2020 10:12:20 GMT

* U.S. blacklists dozens of Chinese firms

* South African rand biggest weekly gainer among EM currencies

* Russian central bank meet due at 1030 GMT

By Shashank Nayar

Dec 18 (Reuters) – Emerging market currencies fell on Friday as the dollar recovered slightly from a week-long beating, while escalating tensions between the United States and China offset optimism around talks of a record U.S. stimulus package.

The U.S. is expected to add around 80 additional companies and affiliates, mostly Chinese, including chipmaker SMIC , to a trade blacklist on Friday, two people familiar with the matter told Reuters.

MSCI’s basket of emerging market stocks dropped 0.3% primarily led by weakness in mainland China stocks , while those in Russia, South Africa and Poland lost between 0.7% and 1%.

Tensions between two of the world’s biggest economies have roiled markets for more than a year, which along with the COVID-19 pandemic, led to a slowdown in global economic growth.

The dollar was slightly off 2-1/2 year lows and an index of emerging market currencies fell 0.1% with Asian currencies and the Russian rouble leading declines.

Crude exporter Russia’s rouble dropped 0.4%, ahead of a central bank meeting, as oil prices declined.

The central bank is expected keep interest rates unchanged as a sliding rouble has seen inflation exceed the target.

“The prospect of unchanged rates is further strengthened by the fact that there will not be any rate meeting in January because of holidays – the next one is scheduled for February,” said Commerzbank analyst Tatha Ghose.

“Hence, in case the rouble were to come under pressure in the interim, after CBR had already cut the rate, it would be too late before the CB could actively defend the exchange rate again.”

The rouble was set to end the week lower, although most other emerging market currencies were on course to post weekly gains after talks of U.S. stimulus measures boosted sentiment.

COVID-19 infections in the U.S. hitting record highs pushed Congressional negotiators in Washington to scramble to agree on details of a $900 billion COVID-19 aid bill.

South Africa’s rand was among the biggest weekly winners, up around 3% in its seventh straight week of gains – longest streak since January 2018.

Most central European currencies dropped against the euro with Hungary’s forint and Czech Koruna falling the most in early trade.

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

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see

(Reporting by Shashank Nayar in Bengaluru; Editing by Amy Caren Daniel)

(c) Copyright Thomson Reuters 2020. Click For Restrictions – https://agency.reuters.com/en/copyright.html

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