LONDON Jan 5 Emerging currencies reversed
strong early gains on Thursday that were driven by the yuan's
surge to two-month highs against the dollar, though emerging
stocks rose almost one percent after the U.S. Fed's tempered
rate hike expectations.
Minutes of the Federal Reserve's December meeting released
on Wednesday showed policymakers thought the world's largest
economy could grow more quickly because of fiscal stimulus under
President-elect Donald Trump's administration.
Yet they also highlighted concerns over policy uncertainty
and the impact of a continuously rising dollar, prompting
the greenback to retreat from its 14-year high.
"The (U.S.) central bank is talking about the possibility of
tightening further because of Trump's fiscal plan but at the
same time there is some cautiousness in the minutes about what
kind of plan he will be able to pass," said Murat Toprak, FX
strategist at HSBC.
"The market has retained this pinch of salt as regards the
outlook: There are too many uncertainties to draw a strong
conclusion at this point."
MSCI's emerging market benchmark rose 0.8 percent
for their third day of gains, as Asian bourses chalked up
healthy gains. .
The biggest moves were on China's yuan, with the
offshore-traded currency surging to the highest in two months
while hitting a one-month high onshore as
overnight borrowing costs in Hong Kong jumped to almost 100
Beijing has stepped into both onshore and offshore yuan
markets to shore up the faltering yuan this week amid
speculation it wants a firm grip on the currency ahead of
Trump's inauguration on Jan. 20.
Commerzbank analysts said the rise in the overnight rate
meant that those shorting offshore yuan would face prohibitively
expensive negative carry costs.
"We believe that the Chinese authorities want to deter the
speculation in the offshore market via consciously raising the
funding costs. However, the side effect is that the genuine
business demand, such as trade, will be affected," they told
The yuan was also helped by data showing China's services
sector accelerated to a 17-month high in December.
Other currencies fared less well despite initial gains as
investors remained focused on risks emanating from China.
South Africa's rand weakened 0.5 percent against the
dollar, after hitting its strongest level in four weeks in early
trade when data showed the private sector continued to expand
thanks to new orders and higher output.
Russia's rouble weakened 0.5 percent after hitting a
17-months high, mirroring oil prices which retreated
after an overnight bounce.
For GRAPHIC on emerging market FX performance 2016, see tmsnrt.rs/2e7eoml
For GRAPHIC on MSCI emerging index performance 2016, 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 878.20 +6.75 +0.77 +1.85
Czech Rep 935.05 +0.84 +0.09 +1.46
Poland 1999.43 -0.50 -0.03 +2.64
Hungary 32720.30 +71.26 +0.22 +2.24
Romania 7220.61 +5.12 +0.07 +1.91
Greece 652.30 -5.24 -0.80 +1.35
Russia 1177.87 +1.18 +0.10 +2.22
South Africa 43960.73 -2.49 -0.01 +0.13
Turkey 76173.95 +30.35 +0.04 -2.51
China 3165.55 +6.75 +0.21 +1.99
India 26872.48 +239.35 +0.90 +0.92
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 27.02 27.02 +0.01 -0.04
Poland 4.37 4.37 -0.06 +0.82
Hungary 308.53 307.80 -0.24 +0.09
Romania 4.51 4.51 +0.05 +0.65
Serbia 123.60 123.55 -0.04 -0.20
Russia 60.26 60.27 +0.02 +1.66
Kazakhstan 332.75 334.00 +0.38 +0.27
Ukraine 26.20 26.60 +1.53 +3.05
South Africa 13.68 13.61 -0.57 +0.34
Kenya 103.55 103.45 -0.10 -1.14
Israel 3.85 3.85 +0.09 -0.01
Turkey 3.62 3.57 -1.41 -2.61
China 6.88 6.93 +0.70 +0.86
India 67.93 67.88 -0.08 +0.02
Brazil 3.22 3.22 +0.00 +1.16
Mexico 21.43 21.43 -0.02 -3.34
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 357 0 .12 7 43.80 1
All data taken from Reuters at 10:13 GMT.
Currency percent change calculated from the daily U.S.
close at 2130 GMT.
(Additional reporting by Claire Milhench; Editing by Raissa