EMERGING MARKETS-EMEA FX gains as dovish Fed eases dollar pressure

PUBLISHED: Thu, 08 Apr 2021 09:05:51 GMT
Share

* Polish zloty rises after c.bank holds rates

* Turkish lira lags peers as financial uncertainty persists

By Ambar Warrick

April 8 (Reuters) – Emerging market currencies rose on Thursday as the dollar and treasury yields retreated on dovish signals from the Federal Reserve, with U.S. monetary policy set to stay loose for the time being.

South Africa’s rand rose 0.3%, according to data from Yahoo Finance. The currency’s relatively higher yield has helped it strengthen despite a weakening South African economy. Most other currencies in Europe, the Middle East and Africa also rose.

In central Europe, Hungary’s forint rose slightly to the euro, while the Polish zloty added 0.3% after the country’s central bank held interest rates near zero levels on Wednesday.

The bank also said the pace of Poland’s economic recovery will depend on the zloty’s exchange rate.

“The recent weakening of the zloty has resulted in a softening of the prevailing narrative on the risks to economic growth posed by a lack of sustained exchange rate adjustment,” analysts at ING wrote in a note.

“Given the expected rebound in the global economy and the assumed significant acceleration in vaccinations in 2Q21, the growth outlook for Poland remains good, despite prolonged restrictions.”

Broader sentiment towards emerging markets was helped by a dip in the dollar and U.S. treasury yields, after minutes from the Federal Reserve’s latest meeting showed the bank ready to maintain accommodative monetary policy in the foreseeable future.

“This is in line with what we’ve been expecting and adds more credence to our view that the Fed is unlikely to start policy normalization any time soon,” Charalambos Pissouros, senior market analyst at JFD Group, wrote in a note.

Emerging market stocks and currencies had come under pressure from a spike in the dollar and yields this year, as improving U.S. economic data had seen investors pricing in sooner-than-expected policy tightening in the United States.

The Turkish lira lagged its EMEA peers, extending losses into a third straight session after disappointing inflation data earlier this week.

Investors have become increasingly wary of the country’s financial credibility after the ousting of four central bank heads in less than two years. 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 William Maclean)

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

Sign Up for Our Newsletter Daily Update

Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent.
Get this delivered to your inbox, and more info about about our products and services. By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.