EMERGING MARKETS-Currencies and stocks edge lower before Fed minutes

PUBLISHED: Wed, 19 May 2021 08:20:08 GMT

* South African inflation rises more than expected

* Lira leads EMEA FX losses

* Russian stocks hover below record highs

By Ambar Warrick

May 19 (Reuters) – Most emerging market stocks and currencies edged lower on Wednesday as investors awaited cues on U.S. monetary policy from the minutes of the Federal Reserve’s recent meeting, which are likely to reiterate the bank’s dovish stance.

The MSCI’s index of emerging market stocks fell 0.2%, with Asian bourses weighing the most as a new wave of COVID-19 infections stoked fears of more restrictions.

The currencies index was flat, with the U.S. dollar trading steady ahead of the minutes from the Fed’s April meeting. Investors widely expect a reiteration of the bank’s dovish stance on inflation and steady interest rates for the near future.

“Yes, the minutes may confirm the Committee’s dovish stance, but following the spike in both headline and core inflation last Wednesday, some members appeared slightly more sceptical with regards to that view,” Charalambos Pissouros, senior market analyst at JFD Group, said.

“If more Fed members appear a bit sceptical in the days to come, the stock market is likely to pull back again, while the dollar is likely to stay supported.”

A bigger-than-expected spike in U.S. inflation last week stirred fears over early policy tightening by the Federal Reserve, although most officials in the bank saw it as transitory.

Turkey’s lira fell the most across currencies in Europe, the Middle East and Africa on Wednesday, shedding 0.6% after the United States condemned allegedly anti-Semitic statements by Turkish President Tayyip Erdogan on the Israel-Gaza conflict.

Selling in the lira was in offshore trade as Turkish markets were closed for a holiday.

Russia’s rouble fell 0.1%, under pressure from losses in oil prices. U.S. and Russian officials are to hold talks later in the day amid a push for a presidential summit to soothe strained ties between the two countries.

Recent strength in oil prices had pushed the rouble to a two-month high. Russian stocks were also hovering just below record highs.

The South African rand fell 0.2% as data showed inflation in April rose more than expected to 4.4%, around the mid-point of the target range set by the central bank.

But the bank is widely expected to hold rates at a record-low of 3.50% when it meets on Thursday, given that inflation is comfortably within the bank’s target range.

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

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Ambar Warrick in Bengaluru; editing by Barbara Lewis)

(c) Copyright Thomson Reuters 2021. Click For Restrictions – https://agency.reuters.com/en/copyright.html

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