(There will be no EMEA-focused emerging-markets report on Jan 1 on account of New Year’s day; Reuters will resume coverage from Jan 4)
* Lira, real among worst EM FX performers in 2020
* Dollar weakness set to continue in 2021
* Hungary’s forint lags in central Europe
By Shashank Nayar
Dec 31 (Reuters) – Emerging-market currencies and stocks were set on Thursday for their best year since 2017, boosted by a sliding dollar and the prospect of a global recovery next year, propelled by COVID-19 vaccine rollouts and more economic stimulus.
The MSCI’s index of emerging-market currencies was at its highest since April 2018, on course to end 2020 with gains of over 3%. Stocks were at a 13-year peak, heading for a 16% rise this year.
After the coronavirus pandemic ravaged developing-world markets earlier this year, they have gained from a favourable U.S. election outcome, historically low interest rates, large fiscal aid and vaccine rollouts.
Analysts at ING said currency markets would get back on track next year as they forecast the dollar to decline by 5% to 10% against most currencies.
“It is clear that investors are being encouraged to move out along the credit curve and out of the dollar too,” ING analysts wrote in a note.
Brazil’s real and Turkey’s lira, which hit record lows earlier this year on worries about a rapid rise in coronavirus cases, the government’s fiscal health and depleting reserves, were among the worst-performing EM currencies this year – both down more than 20% against the dollar.
Russia’s rouble also lost, and stocks ended the year nearly 21% lower as weakness in oil prices and surging local coronavirus cases hit the Russian economy.
However, the rouble might regain some ground in 2021 on expectations that the central bank will leave interest rates steady at current levels, a poll of economists and analysts showed.
South Africa’s rand lost nearly 4.2% of its value this year, but outperformed its EMEA peers as external events led to a return of global risk demand.
Central European currencies weakened against the euro, with Hungary’s forint the worst performer among its peers this year, losing about 10% against the euro on worries about Hungary’s veto of the European Union budget.
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
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For CENTRAL EUROPE market report, see
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For RUSSIAN market report, see (Reporting by Shashank Nayar in Bengaluru, editing by Larry King)
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