EMERGING MARKETS-Rouble woes persist on geopolitical concerns; EMEA assets muted

PUBLISHED: Mon, 19 Apr 2021 08:25:00 GMT

* South African rand leads EMEA gains

* Indian markets plummet on COVID-19 spread

* Rouble hit by new row with Czech Republic

By Ambar Warrick

April 19 (Reuters) – Russia’s rouble dipped on Monday as concerns over Western sanctions against the country persisted, while South Africa’s rand rose as low global interest rates spurred buying into the high-yielding currency.

The rouble led losses across Europe, the Middle East, and Africa, falling 0.6% as the White House warned of consequences if Kremlin critic Alexei Navalny dies in prison. Allies of Navalny revealed plans for large scale protests in a bid to win him medical care.

Tensions with the Czech Republic also rose after it expelled Russian diplomats and accused Moscow of being behind an explosion at a Czech ammunition dump. The move garnered support from Washington and NATO.

The United States announced sanctions targeting the rouble and Russian debt last week, rattling financial markets. But weakness in the rouble pushed the export-heavy MOEX Russian index to a record high.

Broader emerging market currencies moved little, as a damaging second wave of COVID-19 cases offset optimism over a weaker dollar and U.S. yields.

Indian markets, however, plummeted as infections rose at unprecedented levels, putting strain on the country’s healthcare system amid a vaccine shortage. The prospect of new lockdown measures threatened to hurt the already struggling economy.

“New infection rates have risen in several EM economies as new variants take hold and vaccine rollouts remain well behind other parts of the world. This situation is forcing governments to add restrictions that are stalling or reversing recent increases in mobility,” JPMorgan analysts wrote in a note.

Brazil and India are the worst hit among emerging markets. But spiking cases across EMEA have also spurred new curbs on activity.

South Africa’s rand led gains across EMEA on Monday, as the country’s relatively higher benchmark interest rate of 3.5% supported the currency. Global interest rates were lowered significantly last year, due to the pandemic.

Still, the rand was hit hard by gains in U.S. yields last month, which had pressured most currencies in the EM space and set them trading lower for the year.

In central Europe, the Czech crown was slightly weaker against the euro and the dollar, as tensions with Russia ramped up.

Emerging market stocks were slightly higher, taking some support from last week’s gains on Wall Street. Investors were also watching for the corporate earnings season this month. 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

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For RUSSIAN market report, see (Reporting by Ambar Warrick in Bengaluru; Editing by Kirsten Donovan)

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