Economic news

EMERGING MARKETS-Turkish Lira Flat Ahead of C.Bank Meet

  • * Turkey’s central bank expected to cut rates by 50bps
  • * Russia’s rouble firms slightly
  • * South Africa’s rand boosted by stimulus measures

By Ambar Warrick

April 22 (Reuters) - Most emerging market risk assets edged higher on Wednesday amid a swathe of stimulus measures to offset the economic shock from the coronavirus outbreak, although a crash in oil prices kept investors on their toes.

Markets were cautiously optimistic over fresh measures from the United States, South Africa, South Korea and Mexico to pump more cash into their respective economies and tide them through a period of little business activity.

However, with oil prices crashing, and the virus spread showing no signs of slowing, investors largely stuck to safe-haven plays such as the U.S. dollar, keeping risk assets on edge.

Fears of a market rout akin to that seen in March also constrained buying into the developing world space.

Turkey’s lira was flat to the dollar, while stocks firmed 0.7% ahead of an interest rate decision later in the day.

The Turkish central bank is widely expected to cut rates by 50 basis points as it looks to stimulate the economy in the face of the pandemic.

“Today’s meeting has got complicated by a fresh risk-off move which has begun in equity as well as FX markets: USD-TRY has almost reached 7.00 and volatility indicators are surging,” Commerzbank analysts wrote in a note.

“The Turkish central bank may now be more wary of surprising the market with a larger rate cut.”

The lira was around levels last seen during a debt and currency crisis in Turkey, circa 2018.

South Africa’s rand rose to the dollar, but was close to record-low levels. Still, the currency took some support from President Cyril Ramaphosa announcing a 500 billion rand ($26.41 billion) rescue package to cushion the economic blow of the COVID-19 pandemic.

“Even before the coronavirus broke out there was considerable doubt about the sustainability of South African national finances. This has become even more acute as a result of the crisis,” Commerzbank analysts wrote.

Last week, South Africa’s central bank had delivered a surprise interest rate cut, and signalled more easing as it boosted liquidity to cushion the economy from the pandemic.

Russia’s rouble edged up on Wednesday, having sharply depreciated over the past two days due to a crash in oil prices.

The Russian finance ministry is in focus as it plans to hold auctions of OFZ treasury bonds, demand for which is usually seen as a gauge of investors’ sentiment towards Russian assets.

Central European currencies such as the Hungarian forint and the Polish zloty traded in a flat-to-high range against the euro.

Source: Reuters

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