EMERGING MARKETS-Inflation nervousness sends Turkish lira to all-time low
* The dollar hits its highest level in 16 months
* The government of Czech Prime Minister Andrej Babis resigns
* Chinese blue chips win as China Evergrande makes bond payment
Nov. 11 (Reuters) – Most emerging market currencies collapsed on Thursday, with the Turkish lira at record highs, as the US dollar rallied on rising bets of a faster monetary policy tightening in the Federal Reserve.
The greenback hit a 16-month high after data showing rising inflation in the United States strengthened the case for faster Federal Reserve policy tightening.
Higher rates in developed markets dampen the attractiveness of riskier assets, especially those with high external debt like Turkey. It reduces interest rate differentials, which makes emerging currencies attractive for carry trade.
With Turkey’s current account surplus widening less than expected, the pound fell 1% to new lows of 9.95 against the dollar.
The MSCI Emerging Market Currency Index slipped 0.2%, seeking to post its worst session in six months, with the Chinese yuan poised for its biggest percentage decline in two months. The rise in oil prices, which also contributed to the weakness of the currency of crude importer Turkey, supported the ruble of the Russian exporter.
“It looks like the US economic data has had a pretty big effect on emerging market currencies and we expect the region’s currencies to weaken further in 2022 as we see Treasuries and the dollar rise. more, “said William Jackson, chief emerging markets economist at Capital Economics. , also highlighting a slowdown in growth in China.
After falling 2.7% on Wednesday, the South African rand wiped out its initial losses to rise 0.3%, ahead of Finance Minister Enoch Godongwana’s first mid-year budget presentation. He should stay on the fiscally austere path traced by his predecessor Tito Mboweni.
“The task facing the government is Herculean, as the already limited scope of financial policy would be further reduced by a rising debt service ratio,” wrote Elisabeth Andreae, EM and FX analyst at Commerzbank.
An emerging market equity index fell after three days of gains, down 0.1%.
Against the gloom, Chinese stocks rose more than 1%, led by real estate stocks, with a source telling Reuters that some Evergrande bondholders received late coupon payments, easing concerns about a potentially default. unsettling.
Most stock markets outside Asia also rose, with those in Turkey and South Africa each increasing by 1%.
Elsewhere, the Polish zloty fell 0.5% to a six-week low as the migrant crisis on its border with Belarus intensified.
The European Union has said it will extend sanctions against Belarus next week. Belarus’ February 2030 bond fell to over a year and a half on Wednesday before stabilizing.
The Czech koruna fell 0.4% after the country’s government agreed to step down following an election, Prime Minister Andrej Babis said.
For the CHART on the performance of emerging market currencies in 2021, see tmsnrt.rs/2egbfVh For the CHART on the performance of the MSCI emerging index in 2021, see tmsnrt.rs/2OusNdX
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Reporting by Shashank Nayar and Susan Mathew in Bengaluru; Editing by Krishna Chandra Eluri