EMERGING MARKETS-FX hit record peaks as U.S. jobs data dents dollar; LatAm election results eyed

PUBLISHED: Mon, 07 Jun 2021 08:48:16 GMT

* State’s dominant role in economy poses risks – Moody’s on Russia

* Mexican peso up after early count of mid-term elections

* Peru markets to be pressured amid election uncertainty – JPM

By Susan Mathew

June 7 (Reuters) – Emerging market currencies hit all-time highs on Monday as the dollar came under pressure after disappointing U.S. jobs data, but stocks extended losses as investor focus turned to inflation figures later in the week.

MSCI’s index of EM currencies was up 0.2% with Turkey’s lira 0.6% firmer, while the rouble climbed 0.2% with eyes on Russia’s central bank meeting on Friday, where Credit Suisse sees a 25 basis-points (bps) hike more likely than 50 bps.

Moody’s affirmed Russia’s rating and stable outlook over the weekend but warned that the state’s dominant role in the economy posed fiscal risks.

The dollar was flat on Monday, after having dropped on Friday’s U.S. jobs data that was below expectations. Asian EM currencies could see some interim support as markets remain cautious of tapering talks ahead of the meeting, Maybank said in a client note.

Mexico’s peso firmed 0.5%, helping the currency cut all its losses this year after early results following mid-term elections on Sunday showed a reduced majority for Mexico’s ruling party.

“These results will be welcomed by financial markets, as they suggest the ruling party will likely have more difficulties trying to seek constitutional changes to undo market-friendly reforms, as well as reforms that would seek to weaken independent entities,” said strategists at Credit Suisse.

Peru’s presidential vote over the weekend is too close to call with the thinnest of margins between right-wing Keiko Fujimori and socialist Pedro Castillo.

J.P. Morgan on Monday said Peru’s markets are likely to remain pressured amid the election uncertainty.

South Africa’s rand slipped after hitting 28-month highs at open. The country’s economic growth numbers and current account print will be watched for this week.

Meanwhile, MSCI’s index of EM stocks fell for a fourth straight session as investors awaited Thursday’s U.S. consumer prices data after Friday’s jobs miss assuaged some fears that the U.S. economy was picking up at a pace that could fan inflation.

Chinese blue-chips and Hong Kong stocks closed lower as China’s May exports missed expectations. Imports, however, grew at their fastest pace in 10 years.

Moody’s on Monday said China’s new childbirth policies that allow married couples to have up to three children highlight demographic risks in emerging Asia.

Taiwan stocks and currency took a beating as COVID-19 restrictions were extended for two more weeks amid surging cases.

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 Susan Mathew in Bengaluru; Editing by Ramakrishnan M.)

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

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