EMERGING MARKETS-Robust dollar weighs on EM currencies, Turkey’s lira inches up


EM currencies down 0.2%, equities down 0.7%


Turkey’s central bank cuts interest rates to 11% after Erdogan’s push


China leaves lending benchmarks unchanged in October


Yuan is recouping some losses after reports China may ease quarantine

By Bansari Mayur Kamdar

Oct 20 (Reuters) – The lira rose on Thursday ahead of Turkey’s central bank decision, where it is expected to cut interest rates further, while a continued aggressive stance from the US Federal Reserve pushed the greenback and emerging-market currencies higher put under pressure.

The lira was at 18.5940 against the dollar in early trade, compared to a close of 18.6 on Wednesday.

Turkey’s central bank is expected to cut its key interest rate by 100 basis points to 11% by 1100 GMT, a Reuters poll showed on Friday, after President Tayyip Erdogan called for more easing each month and said rates could reach single digits by year-end should be.

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“Even when the CBT cut rates, until recently it was never clear if this was a one-off move – to keep President Tayyip Erdogan happy – or one of many to come,” said Tatha Ghose, FX and EM analyst at Commerzbank in a note.

“But now Erdogan’s own repeated claims that interest rates will be cut further and the central bank’s compliance with this policy make the situation crystal clear.”

The central bank has cut interest rates twice in the last two months, by 100 basis points each time to 12%, even as inflation rose to over 83% in September.

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Overall, emerging market currencies fell 0.2% while equities fell 0.7%, both of which triggered losses for the second consecutive month.

China’s yuan slipped but pared some early losses against the dollar after media reports reported that China is considering reducing the COVID-19 quarantine period for inbound travelers to seven days from 10.

China’s blue-chip CSI300 index also recouped some of its losses, closing up 0.6% after falling as much as 1.3% earlier in the day.

China kept interest rates unchanged for the second straight month, in line with expectations, as authorities withheld further monetary stimulus to avoid sharp policy divergences with other major economies.

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Among other EM currencies, the South African rand slipped 0.2% against the dollar.

Most Central and Eastern European currencies appreciated against the euro, with the Hungarian forint leading gains.

The Polish zloty rose 0.1% against the euro. Data showed that Polish producer prices rose 24.6% yoy in September, beating forecasts. For a 2022 Emerging Markets FX performance CHART, go to http://tmsnrt.rs/2egbfVh. For a 2022 MSCI Emerging Index performance CHART, go to https://tmsnrt.rs/2OusNdX

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For the Russian market report see (Bengaluru reporting by Bansari Mayur Kamdar; Editing by Andrew Cawthorne)


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