EMERGING MARKETS-EMEA FX, stocks gain as Democrat Senate win hits dollar

PUBLISHED: Thu, 07 Jan 2021 08:55:02 GMT

* Lira below 7.3 to dollar

* Tencent, Alibaba hit by U.S. blacklist report

* Rouble underperforms on fears of tough U.S. stance

By Ambar Warrick

Jan 7 (Reuters) – Turkey’s lira hit a more-than four-month high on Thursday, while other stocks and currencies in Europe, the Middle East and Africa benefited from dollar weakness after the Democrats’ taking of the U.S. Senate pointed towards more fiscal spending.

The lira rose about 0.4%, with sentiment towards the currency improving after it traded below 7.3 to the dollar for the first time since August last year.

Flows into the lira have increased after the central bank embarked on a steep rate-hiking spree last year, to rein in inflation.

Broader EMEA currencies rose against a weaker dollar as the path seemed clear for President-elect Joe Biden to carry out his reform agenda, which includes more stimulus measures and higher corporate taxes.

“The principally more expansionary fiscal policy is likely to support not only the economic recovery but also fuel inflation which points towards further USD weakness,” Esther Reichelt, FX and EM analyst at Commerzbank wrote in a note.

The prospect of increased stimulus measures in response to the virus had spurred a late-year rally in emerging markets, with stocks benefiting the most from looser monetary policy.

Russia’s rouble lagged its peers, falling 0.2% on concerns that the Biden administration may take a tougher stance against Moscow than its predecessor.

South Africa’s rand sank 0.5% as a locally originating coronavirus variant and mounting infections raised the possibility of renewed lockdown measures.

Central European currencies firmed to the euro.

EMEA stocks were also higher, with Polish stocks surging 1.7% in catch-up trade after a holiday on Wednesday.

The MSCI’s index of emerging market stocks rose 0.4%, hovering slightly below a 13-year high.

In Asia, Hong Kong stocks dropped as technology majors Alibaba Group Holding and Tencent Holdings sank more than 4% each on reports of the firms getting blacklisted by the United States.

The New York Stock Exchange also said on Wednesday it will delist three Chinese telecom companies in the wake of a White House executive order banning U.S. investment in Chinese military-linked companies.

Sino-U.S. tensions remained elevated after Washington threatened to sanction those involved in the recent arrest of Democracy activists in Hong Kong.

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 Kirsten Donovan)

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

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