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Russian Stocks Hit 3-Week Lows, most Currencies Pressured

  • Russian stocks tumble on Ukraine tensions
  • Ukraine's Hryvnia hits about 3-week low
  • Rouble inches up after Friday slump

Feb 14 (Reuters) - Russia's stock index slumped to touch a near three-week low on Monday while most emerging market currencies were hit by a strengthening dollar on fears of an imminent Russian invasion of Ukraine.

The rouble-based MOEX index slid 3.9%, falling to its lowest level in 18 days, while the dollar denominated RTS share index tumbled 5.2%.

The United States said on Sunday that Russia could invade Ukraine at any time and might create a surprise pretext for an attack. Russia has repeatedly denied it is planning an invasion.

Most emerging market stocks and currencies weakened, while the dollar remained higher as risk-aversion dominated in the face of growing geopolitical worries. The MSCI's index for emerging market stocks fell 1.8%, while its counterpart for currencies eased 0.2%.

"A Russian invasion could result in further risk aversion, which means further retreat in equities and stronger safe havens," said Charalambos Pissouros, head of research at JFD Group.

The rouble strengthened 0.7% against the dollar, recouping some of Friday's declines, with analysts pointing to a sharp rate hike last week lending some support to the Russian currency. 

"That's an indication there are still market participants who are willing to buy the high-yielding Russian rouble," said Piotr Matys, senior FX analyst at In Touch Capital Markets.

"It's worth noting that the central bank raised interest rates further on Friday, making the rouble even more attractive...but the currency is likely to remain vulnerable," he added.

The rouble has shed 2.6% so far this year, underperforming a broader emerging market currency gain of 0.3% in 2022.

The Ukrainian Hryvnia fell 1.5% against the dollar to its lowest level in nearly three weeks, while its government dollar-denominated bonds lost roughly 10%.

Russia's dollar-denominated bonds fell as much as 3.1 cents .

South Africa's rand rose 0.4%, while Turkey's lira fell 0.3%.

According to calculations by three economists, Turkey's new cut to value added tax (VAT) on basic food items should decrease overall inflation by 1.5 percentage points in two months.

Turkey's finance minister on Friday said inflation will fall to around 24% by year-end and hit single digits by May of 2023, painting a far rosier picture than that of economists who see it 10 percentage points higher. 

Reporting by Shreyashi Sanyal and Anisha Sircar in Bengaluru; Editing by Kirsten Donovan

Source: Reuters

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