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EMERGING MARKETS-Turkish lira leads EMEA FX gains, Rouble flat after steep losses

PUBLISHED: Mon, 25 Jan 2021 09:18:18 GMT

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* South African stocks hit record high

* MSCI EM stocks index just below record high

* U.S. stimulus hopes drive risk appetite

By Ambar Warrick

Jan 25 (Reuters) – Turkey’s lira led gains across emerging market currencies on Monday after the S&P posited a stable outlook for the country, while Russia’s rouble traded flat after logging steep losses last week on geopolitical tensions.

Turkey’s lira rose 0.4% to the dollar, leading gains across Europe, the Middle East and Africa (EMEA) after ratings agency Standards and Poors on Friday posited a stable economic outlook for the country, citing optimism over recent monetary tightening.

Data on Monday also showed business confidence among Turkish manufacturers grew in January.

Sentiment towards the lira has improved after a series of interest rate hikes. The central bank has also vowed to combat lira weakness and high inflation with more action if necessary, and is expected to release its 2021 inflation forecast later this week.

Most other EMEA currencies rose on continued optimism over a $1.9 trillion stimulus package from the United States. Optimism over the package has driven gains in emerging market risk assets in recent weeks, with stocks touching a series of record highs.

Emerging market stocks were trading just below a record high on Monday. Turkish stocks rose about 0.3%, while Russian bourses added 0.7%.

“Some investors remain concerned about the surge in COVID-19 mutations, but it’s fiscal and monetary policies along with earnings that will determine the next move in equities,” Hussein Sayed, chief market strategist at FXTM wrote in a note.

“Expectations of substantial fiscal aid are keeping the bulls in charge, despite Republicans saying the $1.9 trillion package is too costly.”

Russia’s rouble was flat to the dollar after the Kremlin said it was open to dialogue with the United States.

The currency, and Russian stocks, had marked large losses last week on geopolitical risks related to the arrest of Kremlin critic Alexei Navalny.

South Africa’s rand fell about 0.6% as investors weighed the possibility of more coronavirus-related lockdowns in the country. Still, the currency remains attractive due to relatively higher interest rates than most other emerging market economies.

South African stocks jumped more than 2% to a record high, boosted by retailer Woolworths Holdings Ltd after it forecast a large jump in its first-half headline earnings per share.

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 Ed Osmond)

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