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EMERGING MARKETS-Turkish lira set for worst week in nearly three months

EMERGING MARKETS-Turkish lira set for worst week in nearly three months

reuters.com · 06/10/2022 05:36
EMERGING MARKETS-Turkish lira set for worst week in nearly three months

By Shreyashi Sanyal

- Turkey's lira looked set on Friday to post its worst week since March, fuelled by worries of more rate cuts amid surging inflation, while South Africa's rand edged higher against a softer U.S. dollar.

The lira TRY= weakened to 17.27 at one point against the dollar, bringing it closer to record lows hit in late December as a pledge by President Tayyip Erdogan to keep interest rates low earlier in the week upped selling pressure on the currency.

For the week, the currency was down 4.6% and set to mark its biggest weekly decline in nearly three months.

Turkey's treasury said a series of new "solution-oriented steps" would be announced for the economy beleaguered by surging inflation and a sliding lira. The announcement helped stem some declines in the currency, but proved to be short-lived. nL8N2XX0G0

The country's 5-year credit default swaps touched a 14-year high of 790 basis points, according to S&P Global. nL8N2XX1DT

Emerging market assets came under pressure this week as concerns re-emerged about COVID-19 curbs in China after Shanghai imposed new lockdown restrictions. MSCI's indexes for EM stocks .MSCIEF and currencies .MIEM00000CUS were set for their first weekly declines in four.

"China's coronavirus problem doesn't look like it's going away any time soon, with a fresh district lockdown now in force in Shanghai," said Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown.

"This is causing a ripple of uncertainty about demand in the Chinese economy, which is set to stay given Beijing's zero-COVID stance which has been disabling parts of the economy as authorities try to eradicate the virus."

South Africa's rand ZAR= rose 0.6% against a weakening dollar, and headed towards its fourth straight weekly gain. Stocks .JALSH in the region dropped 0.5%.

The greenback lost some steam as investors awaited U.S. consumer price data for May, which will be the last key piece of inflation data before the Federal Reserve's policy meeting next week. Expectations are that the U.S. central bank will hike its lending rate by 50 basis points.

Russia's rouble RUBUTSTN=MCX firmed nearly 2%, moving towards a more than two-week high hit in the previous session with the support of capital controls, as the market awaited an expected rate cut by the central bank. nL8N2XX1CR

Separately, BofA flows data showed EM bonds suffered outflows for a ninth straight week and stocks for a fifth consecutive week, losing $1.3 billion and $1.6 billion, respectively. nL8N2XX0YT

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 Subhranshu Sahu)

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