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EMERGING MARKETS-Currencies, stocks rise as aggressive rate-hike fears ebb

EMERGING MARKETS-Currencies, stocks rise as aggressive rate-hike fears ebb

Reuters · 07/28/2022 05:23
EMERGING MARKETS-Currencies, stocks rise as aggressive rate-hike fears ebb

Turkish cenbank hikes end-2022 inflation view to 60%

Hungary central bank raises 1-wk deposit rate by 100 bps

Chinese yuan at one-week high; dollar at 3-week low

By Anisha Sircar

- Currencies in emerging markets bounced on Thursday as the dollar fell after the U.S. Federal Reserve's less hawkish than feared tone, while stocks jumped to a more than two-week high.

Stocks .MSCIEF jumped 0.6% amid a broad risk-on mood, while currencies .MIEM00000CUS firmed 0.3%, with Mexico's peso MXN=, India's rupee INR=IN and Russia's rouble RUBUTSTN=MCX firming between 0.1% and 1%. China's yuan CNY= jumped to a one-week high of 6.74 per dollar.

In a widely anticipated move, the Fed lifted rates by 75 basis points (bps) on Wednesday, but altered its statement to cite softening recent data. Investors scented a possible slowdown in the pace of hikes, sending the dollar =USD to a three-week low. MKTS/GLOB FRX/

A surging dollar in recent weeks has sent emerging market (EM) currencies down 0.6% this month, while stocks have shed 0.5% on warning signs about growth amid intensifying risks of inflation and central banks' tightening moves.

"(EM equity returns) are likely to remain volatile in the -term due to continued uncertainty over the global growth outlook, the path of the U.S. dollar and the COVID situation in China," said Regis Chatellier, director of EM strategy at Oxford Economics.

"However, recent macro indicators point to an ongoing recovery across most EMs ... Elevated commodity prices, tightening cycles close to peaking, improved fiscal predicaments and increasing Chinese stimulus should support EM growth going forward."

China will help property developers by issuing 1 trillion yuan ($148.2 billion) in loans for stalled developments as it tries to relieve pressure on the economy, according to the Financial Times.

Meanwhile, as the U.S. pushes ahead with its steepest interest rate hikes in a generation, investors are unusually poised to buy in Asia's EMs.

Hungary's forint EURHUF= slipped 0.6% against a strong euro. The National Bank of Hungary raised its one-week deposit rate by 100 bps as expected, allowing the rate to catch up with the base rate following Tuesday's hike.

Turkey's central bank raised its year-end annual inflation forecast to 60.4% from 42.8% three months ago, and lifted its end-2023 mid-point forecast to 19.2% from 12.9%, a presentation by Governor Sahap Kavcioglu showed.

Consumer prices in Russia declined 0.08% in the week to July 22 after sliding 0.17% a week earlier, data showed, vindicating the central bank's decision to cut rates more sharply than expected last week.

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

For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

(Reporting by Anisha Sircar in Bengaluru;
Editing by Vinay Dwivedi)