Economic news

EM-Currencies Firm as Fed Eyed; EM Shares Struggle

* Rand bounces off 8-month lows

* Chinese property developers fall

* Lira extends gains ahead of inflation data on Wed

Nov 2 (Reuters) - A 1% slide in Chinese shares curbed gains of a broader index of emerging market equities on Tuesday, while most currencies rose against a flat U.S. dollar ahead of the Federal Reserve’s policy decision on Wednesday.

Markets are expecting the central bank to start tapering stimulus, but see price and wage increases as a challenge as policymakers try to give the economy as much time as possible to restore the jobs lost since the pandemic.

South Africa’s rand joined other emerging market peers in moving higher against the dollar, putting it on course to end a five-day losing streak despite some unease about the result of a municipal election vote that could dampen government reforms.

The currency rose 0.3%, retreating from eight-month lows.

Based on a climate of discontent and a few surveys that have been conducted, some political analysts predict the ruling ANC’s vote share could fall below 50% for the first time since the end of apartheid.

“This might further weaken the position of the party and of President Cyril Ramaphosa which in turn might dampen the prospect of further reforms,” said You-Na Park-Heger, a foreign exchange and emerging markets analyst at Commerzbank.

“If these concerns were to materialise it is likely to get more difficult for the rand to regain ground,” she said. The rand is down about 4% so far this year.

Russia’s rouble recovered after losing close to 1% on Monday. The Russian central bank sees inflationary risks stemming from rising food prices that could keep inflation expectations at an elevated level.

The bank, which is expected to raise rates for the seventh time next month, said growth in investment activity in Russia slowed in the third quarter and is expected to slow further this year.

Turkey’s lira extended gains with investors watching for October data on inflation due on Wednesday. The number is seen rising more than 20%, making central bank policy decision challenging amid pressure to cut rates further.

Meanwhile, shares and bonds of Chinese property developers stumbled on Tuesday as worries over spreading financial contagion worsened following a debt exchange from one of the country’s top 20 homebuilders, Yango Group.

Yangbo shares fell 6.7%, while China Evergrande lost almost 3%.

Mainland China shares slumped 1%, while gains in big technology names helped limit losses for Hong Kong’s main index.

Most other bourses in EM gained, helping MSCI’s index of EM shares rise 0.1% after five days of losses. Stocks in Turkey, South Africa and Russia rose between 0.3% and 0.5%.

Reporting by Susan Mathew in Bengaluru; Editing by Emelia Sithole-Matarise

Source: Reuters

To leave a comment you must or Join us

More news

Back to economic news list

By visiting our website and services, you agree to the conditions of use of cookies. Learn more
I agree