EMERGING MARKETS-EMEA FX dips on dollar bounce; Polish zloty outperforms for the week

PUBLISHED: Fri, 09 Apr 2021 08:06:08 GMT

* Zloty set to add 2% to the USD this week

* EM stocks retreat, set for weekly losses

* Russian rouble among worst weekly performers

By Ambar Warrick

April 9 (Reuters) – Emerging-market currencies retreated on Friday after the dollar bounced back from two-week lows, but were set to rise for the week with the Polish zloty marking large gains after the central bank held lending rates.

Russia’s rouble and the South African rand led losses across currencies in Europe, the Middle East and Africa (EMEA), while the MSCI’s index of emerging-market currencies fell 0.2%.

But the index was set to add about 0.2% for the week, benefiting from recent weakness in the dollar and U.S. Treasury yields. While the dollar rose from two-week lows on Friday, it was still set for its worst week this year, following dovish comments from the Federal Reserve.

“The Fed has been trying for a long time to dampen expectation of an imminent normalisation of monetary policy … Against this backdrop economic data coming in below expectations can put a dampener on the dollar. That means the dollar has not been able to turn the tables in its favour,” analysts at Commerzbank wrote in a note.

Following this sentiment, U.S. yields had retreated through the week, while emerging-market debt saw strong inflows. High-yielding currencies such as the rand also marked strong gains for the week.

Central European currencies were all set for weekly gains, with the Polish zloty rising the most against the dollar and the euro after the Polish central bank held interest rates earlier in the week.

The zloty was set to be the best-performing EMEA currency for the week, adding about 2% to the dollar and 0.8% to the euro.

Recent weakness in the dollar and U.S. yields came as a source of relief for emerging market assets, which are largely trading down for the year amid pressure from an increase in U.S. lending rates.

Bucking the trend, Russia’s rouble was set for a fourth straight weekly loss, its worst losing streak since the height of the COVID-19 pandemic last year.

Recent losses in the currency were driven by concerns over a possible military conflict between Russia and Ukraine, as well as Western criticism of Moscow’s treatment of prominent Kremlin critic Alexei Navalny.

Turkey’s lira was muted for the week, with investors remaining wary over the country’s financial credibility after major shifts in central bank governance over the past two years.

Emerging-market stocks fell for the day, and were set for mild weekly losses.

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 Larry King)

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

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