Rouble Slips ahead of Central Bank Meeting, Stocks Hover at Record Highs

The Russian rouble led declines among emerging market currencies on Friday, following strong gains earlier in the week, while regional stocks hovered near record highs on optimism around more U.S. stimulus.

The rouble dropped 0.4 to the dollar, as Russia warned that it was ready to sever ties with the European Union if the bloc hits it with painful economic sanctions.

Russias central bank meeting later in the day, is also on investors radar. It is expected to keep interest rates unchanged with inflation well above the 4 target.

The CBR Central Bank of Russia is very cautious and therefore unlikely to cut rates when inflation is accelerating, let alone overshooting to well above the 4 inflation target, said Tatha Ghose, an analyst at Commerzbank.

Policymakers have noted that the acceleration is driven by temporary factors and is likely to reverse during H2 2021. Still, a part of the overshoot is owing to a weakerthanexpected exchange rate in recent months, which could continue because of political developments.

South Africas rand fell 0.1 a day after President Cyril Ramaphosas state of the nation address failed to detail any new reforms.

Ramaphosa said the country, hit hard by a second wave of COVID19, would undertake a massive vaccination program and had secured millions of doses of Johnson Johnson and Pfizer Inc vaccines.

Mediumterm concerns about vaccines not being effective against emerging COVID19 variants could challenge the positive narrative for EM…

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