| LONDON, March 8
LONDON, March 8 A rise in U.S. Treasury yields
weighed on emerging assets on Wednesday, with the Turkish lira
shrugging off central bank pledges for more monetary tightening
to slump one percent against the dollar.
Investors in most markets have retreated to the sidelines
before Friday's U.S. jobs data which may offer clues as to the
pace of monetary tightening by the Federal Reserve, though a
rate rise next week has been more or less priced in. However
10-year Treasury yields inched to six-week highs.
Emerging equities seesawed around flat, though Hong
Kong-listed Chinese stocks rose 0.3 percent.
Chinese local markets shrugged off data showing the country's
first trade deficit in two years.
Turkey is one of the markets that will likely be worst hit
in event of a more hawkish Fed, given its current account
deficit and low domestic policy credibility. South Africa too
could suffer, especially after data showing a surprise growth
contraction towards end-2016, highlighted its sluggish economy.
The lira has slipped almost 5 percent in the past 10 days as
the likelihood rose of a Fed move this month and did not
receive any support from governor Murat Cetinkaya who signalled
more monetary tightening was on the way if needed.
Simon Quijano-Evans, EM strategist at Legal & General said
that while an upswing in U.S. yields was negative for the
emerging markets asset class, "you are bound to get bigger moves
on higher-beta EM stories such as Turkey and South Africa."
While Cetinkaya has lifted the central bank funding rate to
a near five-year high over 10.6 percent, he failed to mention
plans to shift to more orthodox monetary policy.
Quijano-Evans noted, however, the central bank had managed
to tighten policy in recent weeks without verbal interference
from the government and that has helped calm lira markets.
"That should show (Turkey's) leadership an independent
central bank is the most important policy tool they can have,"
The South African rand fell 0.5 percent to the dollar
, deepening its losses as data showed business confidence
fell in February.
The Polish zloty slipped 0.2 percent before a central bank
meeting that will likely hold rates unchanged.
The Czech crown eased in forward markets,
extending falls from Tuesday when data showed authorities had
bought a record 14.4 billion euros in January, tripling its
reserves since 2013.
The exchange rate implied in six-month forwards contracts
eased to a one-month low at 26.865 per euro.
SEB predicted more speculative pressure on the crown, with
this week's inflation data likely surprising to the upside. The
Czech National Bank has pledged not to end its policy of capping
the currency's strength before the second quarter.
"We expect the central bank to remove the floor after the
French election to avoid potential volatility...Euro/crown will
stabilize around 25.5 (after cap exit)," they said.
In bond news, emerging borrowers raced to raise money before
the Fed move, with Kuwait on a roadshow for its long-awaited
issue and Russian sub-sovereign Gazprom hoping to follow peers
such as Evraz and Polyus to tap markets.
For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml
For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see)
Emerging Markets Prices from Reuters
Equities Latest Net Chg % Chg % Chg
Emrg Mkt Indx 936.18 -0.32 -0.03 +8.57
Czech Rep 973.54 +1.84 +0.19 +5.63
Poland 2213.97 +12.99 +0.59 +13.66
Hungary 32621.27 +179.07 +0.55 +1.93
Romania 7914.03 +8.46 +0.11 +11.70
Greece 652.27 +9.11 +1.42 +1.34
Russia 1097.44 -13.02 -1.17 -4.76
South Africa 44333.80 -6.53 -0.01 +0.98
Turkey 90130.06 -683.55 -0.75 +15.35
China 3241.18 -1.22 -0.04 +4.43
India 28914.39 -85.17 -0.29 +8.59
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 27.00 27.02 +0.07 +0.02
Poland 4.31 4.30 -0.10 +2.25
Hungary 309.96 309.91 -0.02 -0.37
Romania 4.54 4.54 -0.09 -0.18
Serbia 123.70 123.67 -0.02 -0.28
Russia 58.37 58.16 -0.36 +4.95
Kazakhstan 315.85 315.17 -0.22 +5.64
Ukraine 26.95 26.95 -0.00 +0.19
South Africa 13.01 12.97 -0.31 +5.54
Kenya 102.40 102.50 +0.10 -0.03
Israel 3.68 3.67 -0.25 +4.60
Turkey 3.71 3.68 -0.97 -5.06
China 6.91 6.90 -0.11 +0.51
India 66.72 66.62 -0.16 +1.84
Brazil 3.12 3.12 -0.02 +4.29
Mexico 19.58 19.49 -0.46 +5.80
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 320 -1 .08 7 63.99 1
All data taken from Reuters at 09:58 GMT.
Currency percent change calculated from the daily U.S.
close at 2130 GMT.
(Editing by Toby Chopra)