EMERGING MARKETS-Rouble leads FX losses, stocks set for worst day in 2 months

PUBLISHED: Thu, 28 Jan 2021 09:14:22 GMT

* Turkish lira sole EMEA gainer on inflation optimism

* Polish zloty at near one-month low

* EM stocks see extended profit-taking

Jan 28 (Reuters) – The Russian rouble led losses across emerging market currencies on Thursday as geopolitical tensions weighed, while stocks were set for their worst day in nearly two months, tracking a weak performance on the Wall Street.

The rouble sank 1% to its lowest level since early-December, as concerns over western sanctions grew after the arrest of Kremlin critic Alexei Navalny and subsequent protests sparked criticism from U.S. officials.

Weakness in the crude market also weighed on the rouble, which breached a key 76 to-the-dollar level.

Most other currencies in Europe, the Middle East and Africa retreated as concerns over a vaccine rollout and spiking COVID-19 infections weighed, while the MSCI’s index of emerging market currencies fell 0.3% to an over one-month low.

The MSCI’s index of emerging market stocks plunged 1.8% and was set for its worst day in nearly two months.

Overnight losses on the Wall Street, spurred by concerns over high valuations and a second wave of the coronavirus, prompted selling across global stock markets. But they were still trading comfortably positive for the year, having rallied to record highs recently.

“After a rally of this magnitude, and with stocks close to record highs, it is understandable that near-term uncertainty is leading to an increase in volatility. In our view, however, attention will likely shift back to earnings, stimulus, and the vaccine rollout,” Mark Haefele, chief investment officer, UBS Global Wealth Management, wrote in a note.

South Africa’s rand fell 0.5%, while stocks retreated further from a record high touched on Monday.

The Turkish lira was the sole gainer in EMEA, rising slightly after the central bank vowed to keep monetary policy tight until inflation in the country will reach its 5% target, which it targeted to achieve by end-2023.

The bank also held its mid-point inflation forecast for 2021-end steady at 9.4%, despite higher market expectations in the range of 11% to 12%.

Central European currencies weakened to the euro, with the Polish zloty touching a near one-month low.

The Chinese yuan rose slightly as tight interbank liquidity heading into Lunar New Year pushed money markets rates higher. 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 Sherry Jacob-Phillips)

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

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