Most emerging market currencies firmed on Thursday, and stocks broke a six-session losing run, as the dollar subsided after a rally spurred an increasingly hawkish US Federal Reserve.
Turkey’s lira shrugged off early losses to rise 0.5%, extending Wednesday’s gains which came after a brutal 11-day losing streak over which it lost 24% and hit record lows of 13.45 against the greenback. The decline was set-off by President Tayyip Erdogan defending interest rates cuts even as inflation surged.
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With minutes of the Fed’s last meeting showing policymakers turning increasingly hawkish, and as better-then-expected jobless claims data supported their argument, the dollar rallied to over 16-month highs on Wednesday.
On Thursday, it retreated slightly, down 0.2% against a basket of six major rivals, helping riskier currencies higher.
Russia’s rouble moved further away from over four-month lows, back above 75 per dollar, while South Africa’s rand recovered from a one-year trough.
The Ukrainian hryvnia was flat at 13-week lows. The country began strengthening its frontier amid increasing Russian military activity and the Belarusian migrant crisis.
The currencies of Poland and Hungary rose about 0.3% each to the euro.
Volumes are expected to be thin with US treasury and stock markets shut for Thanksgiving.
MSCI’s index of emerging market stocks rose 0.1% after losing almost 3% over the last six sessions.
Mainland China shares slipped as insurers and property developers fell.
But indebted developer Kaisa Group’s shares surged almost 14% on resuming trading after being halted on November 5, as it sought to extend the maturity of a $400 million bond by a year and a half – part of its efforts to avoid a messy default and resolve a liquidity crisis.
Most bourses outside Asia rose, with Turkey’s BIST index staying at record highs, looking to end the week up 5%.
Citigroup on Thursday downgraded Turkish banks, saying recent currency volatility would weigh on their performance going forward. “Yapi Kredi and Akbank best positioned to weather the storm, while Isbank may already be close to its minimum tier 1 requirement,” they said.
Increasing Covid-19 cases, especially in Europe, as well as tensions between Beijing and Washington after the latter put a dozen Chinese companies on its trade blacklist, kept sentiment in check.
Mexico’s peso firmed 0.1% after hitting eight month lows on Wednesday when leftist Mexican President Andres Manuel Lopez Obrador suddenly changed his nomination for central bank chief to a deputy finance minister and close ally, Victoria Rodriguez.