EMERGING MARKETS-FX set for best month of 2021; weak China data weighs

PUBLISHED: Fri, 30 Apr 2021 10:16:29 GMT

* China’s factory activity growth slows in April

* Turkey extends lay-off ban

* Dollar drops for fourth straight week

By Shashank Nayar

April 30 (Reuters) – Disappointing Chinese data knocked down emerging market currencies and stocks on Friday, but the currencies were still on pace to post their best month of the year.

China’s factory activity growth slowed and missed forecasts in April as supply bottlenecks and rising costs weighed on production and overseas demand lost momentum.

That led to a 0.1% drop in MSCI’s index of emerging market currencies, while the equity equivalent index fell 0.8%, its worst day in more than a week.

The MSCI currency index had risen 1.6% in April, its best month since December, and stocks gained 2.8% this month, their biggest monthly gain since January.

South Africa’s rand dropped 0.9%, as private sector credit growth slowed in March, but the currency was set to gain for a third consecutive month and was the top monthly gainer among its emerging market peers.

The Turkish lira slipped 0.4%, but was set to gain nearly 1% on the week.

A tight central bank monetary policy coupled with governance measures, like an extension on the ban on lay-offs, have helped the lira over the past few sessions. However, it has been the worst performer this year.

“The main takeaway from the upward forecast revision is that CBT (Central Bank of Turkey) now has even less basis for cutting the benchmark rate in coming months,” said Tatha Ghose, an analyst at Commerzbank.

Turkey’s central bank will keep its interest rates on hold until the fourth quarter due to price pressures, Morgan Stanley forecast on Thursday, adding any premature cut would result in strong pressures on the lira.

“If April, indeed, turns out to be the peak of inflation, after which there will be steady moderation, then rate cuts would follow,” Ghose said.

Russia’s rouble was 0.1% weaker against the dollar, moving away from its April peaks ahead of the extended May holidays declared by President Vladimir Putin.

Most central European currencies eased against the euro, with Hungary’s forint , Czech’s crown and the Polish zloty down between 0.1% and 0.2%.

The U.S. dollar was set for its fourth straight weekly decline against a basket of major peers on Friday, and was set for its worst monthly decline since July last year as the Federal Reserve stuck to its message of ultra-low interest rates for longer coupled with huge stimulus packages. 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 Shashank Nayar in Bengaluru; Editing by Amy Caren Daniel)

(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.