Rouble Leads EM FX Higher on Oil Gains

Russia’s rouble firmed for the first time in five days on Monday as oil prices jumped on hopes of prolonged cuts in output, while emerging market stocks jumped to a more than two-year high on signs the economic rebound in China was gaining momentum.

The rouble gained 0.9% to 76.90 to the dollar by 0922 GMT after easing last week due to a jump in global coronavirus cases and as data showed a contraction in Russian GDP in the third quarter.

The rouble has had a volatile few weeks, plunging to its lowest versus the euro since late 2014 on the eve of the U.S. election and then posting its biggest one-day gain against the dollar in four years the day after the vote.

Turkey’s lira was largely flat ahead of a central bank meeting later this week, where analysts expect a sharp interest rate hike that could ease pressure on the exchange rate and, in turn, on inflation.

“Out of the two, Turkey is definitely far more exciting to watch,” said Piotr Matys, an emerging markets FX strategist at Rabobank, referring to central bank meetings in Turkey and South Africa.

The lira last week rallied about 11% in its best week in more than 19 years as a major shake-up in the country’s economic leadership raised hopes for more immediate measures to support the battered currency.

“The newly appointed governor is fully aware that there’s no room whatsoever for him to disappoint the market. I expect a hike to the effect of 500 basis points in the one-week repo rate,” Matys said.

Turkish stocks rose as much as 1.3% to a record high with sentiment also getting a boost from data showing a jump in production in the auto sector.

South Africa’s rand, widely seen as a proxy for emerging market risk, rose 0.6% against the dollar, while stocks edged up 0.2%, helped by gains in energy giant Sasol.

Equities in the emerging markets of Europe, the Middle East and Africa tracked solid gains across Asia following better-than-expected industrial output data in China, with MSCI’s index of emerging market stocks up 1.3% at its highest since March 22, 2018.

Fitch on Friday downgraded its outlook on Belarus to negative, saying greater political unrest could lead to additional pressure on international reserves and deposit outflows.

(Reporting by Shriya Ramakrishnan in Bengaluru; additional reporting by Sagarika Jaisinghani; Editing by Subhranshu Sahu)

Source: Reuters

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