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EM-Turkish Lira Gains for 6th Day, EM Stocks at 13-Year High

Dec 30 (Reuters) - The Turkish lira rose for a sixth straight session on Wednesday after the extension of a free-trade deal with Britain, while other emerging market currencies extended gains against the dollar on optimism over additional U.S. fiscal aid.

The lira jumped 0.4% to a fresh four-month high as the trade deal with the United Kingdom, signed days before Brexit, would keep up the existing flow of goods.

Turkey also extended a ban on lay-offs for two months from Jan. 17 to limit the impact of the COVID-19 pandemic on employment and the economy in general.

Traders also shrugged off fresh developments that could lead to delays in U.S. stimulus cheques and maintained bets that additional financial aid was still likely.

U.S. Senate Majority Leader Mitch McConnell on Tuesday put off a vote on increasing COVID-19 relief checks from $600 to $2,000 and urged senators to override President Donald Trump’s veto of a defence bill.

MSCI’s index of emerging market stocks surged 1.3% to 13-year highs as record stimulus measures and optimism about COVID-19 vaccines drove investors towards riskier assets.

“The market is of the view that U.S. households will receive additional support a few months down the line even if the government decides to pull back higher stimulus checks,” said Piotr Matys, FX strategist at Rabobank.

MSCI’s index of emerging market currencies regained its April 2018 high, benefiting from broader weakness in the U.S. dollar after Trump signed a coronavirus aid bill on Sunday.

Russia’s rouble steadied as a surge in prices of oil, the country’s top export, on vaccine optimism offset worries over possible new sanctions and surging domestic coronavirus infections.

Most central European currencies were little changed, while Poland’s zloty firmed even as its central bank chief hinted towards further rate cuts during the first quarter of next year.

Widespread expectations were that key interest rates would remain unchanged in 2021 since the central bank cut the cost of borrowing three times by a cumulative 140 basis points during the first wave of the pandemic.

The zloty weakened more than 1% late Tuesday, causing speculation of a further intervention.

Reporting by Shashank Nayar in Bengaluru; Editing by Aditya Soni)

Source: Reuters


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