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EMERGING MARKETS-FX rejoices pause in dollar, still eyes worst month since pandemic slump

reuters.com · 04/29/2022 05:02
EMERGING MARKETS-FX rejoices pause in dollar, still eyes worst month since pandemic slump

There will be no EMEA emerging markets report on Monday on account of a bank holiday in Britain.

MSCI EM stocks index eyes worst monthly fall in nine

South African rand rises, still down 8% in April

Russian onshore rouble steady ahead of rate cute

By Shreyashi Sanyal

- A gauge for emerging market currencies breathed a sigh of relief after the dollar cooled its blistering rally on Friday, ending a tough month with its worst fall since the onset of the pandemic on worries of impending rate hikes by the Federal Reserve.

The MSCI's index for EM currencies .MIEM00000CUS rose 0.5% for the first time in 10 days, but headed for a monthly fall of 2.8% - its worst performance since March 2020.

The dollar, even as it pulled back from 20-year highs on Friday, has been lifted by a combination of expectations for U.S. rate increases next week and growth concerns in China and Europe.

Most of April saw a tremendous shift in investor preferences from risky emerging market assets to the more stable developed world as central banks like the Fed employed more aggressive policy stances, making currencies and stocks in the developed world less attractive.

Cooling commodity prices also hurt emerging markets, especially those in resource-rich Latin America that benefited heavily from a spike in March set off by the Russia's invasion of Ukraine.

South Africa's rand ZAR= rose 0.8%, snapping a nine-day losing streak but heading towards monthly declines of 8%. Turkey's lira TRY= shed 0.2% against the dollar, trading at a very narrow range for most of April.

Russia's rouble RUBUTSTN=MCX steadied in Moscow trade ahead of a likely 200 basis point rate cut by the central bank. nL5N2WR2WQ

"This will be a further reversal of the emergency 10% rate hike put in place after the rouble collapsed on western sanctions," said Chris Turner, global head of markets and regional head of research for UK & CEE at ING.

"The rate cut is expected now that USD/RUB is artificially trading very low at 72 - driven by no natural buyers (foreigners cannot sell Russian assets and Russian imports have collapsed) and continued selling of energy FX receipts."

The MSCI's index for EM stocks .MSCIEF firmed 2.5%, as China stocks .SSEC, .CSI300 rose more than 2% each after authorities vowed at a top-level meeting to step up policy support to stabilise the economy and financial markets hit by domestic COVID-19 outbreaks and rising geopolitical risks. .SS

Still, the broader EM equities index is set for monthly declines of 5.4%, its worst fall in nine months.

For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets nTOPEMRG

For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

(Reporting by Shreyashi Sanyal in Bengaluru;
Editing by Robert Birsel)

((Shreyashi.Sanyal@thomsonreuters.com; +1 646 223 8780; +91 961 144 3740; Twitter: https://twitter.com/s_shreyashi;))