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EMERGING MARKETS-Emerging FX feel dollar pinch, Turkish assets rattled
October 23, 2017 / 9:18 AM / a month ago

EMERGING MARKETS-Emerging FX feel dollar pinch, Turkish assets rattled

LONDON, Oct 23 (Reuters) - A stronger dollar increased pressure on some emerging currencies on Monday with the Turkish lira and stocks suffering as the latest concerns over Ankara’s relationship with Washington compounded the weaker global backdrop.

The dollar sailed to the highest level in more than two weeks, still enjoying a boost from U.S. President Donald Trump and Republicans clearing a hurdle on tax reforms last week and speculation over who will take over at the helm of the Federal Reserve.

“We are seeing increasing pressure on emerging market currencies and that is likely to continue over the near term as we still have a lot of speculation regarding who will succeed Janet Yellen at the Fed,” said Phoenix Kalen at Societe Generale.

“That is weighing on investors’ minds, alongside the strength of the dollar that’s coming from expectations of fiscal and tax reform.”

The Chinese yuan fell against the U.S. dollar after a weaker midpoint fixing while Mexico’s peso weakened 0.2 percent.

But Turkey’s lira and South Africa’s rand - both seen as vulnerable to U.S. interest rate rises due to current account deficits - were the hardest hit, weakening for a second straight session.

Losses in the lira of more than 1 percent came after Turkey’s banking regulator urged the public on Saturday to ignore rumours about financial institutions in an apparent dismissal of a report that some banks face billions of dollars of U.S. fines over alleged violations of Iran sanctions.

“Given the level of tensions with the U.S., the market is still sceptical about this denial,” said Inan Demir at Nomura.

“The numbers mentioned are large...the largest fine mentioned was $5 billion and that would be a very large fine in comparison to any bank’s equity in Turkey.”

Relations between NATO allies Washington and Ankara have been strained by a series of diplomatic rows. Meanwhile U.S. authorities have hit global banks with billions of dollars in fines over violations of sanctions with Iran and other countries in recent years.

Adding to the woes was data on consumer confidence, which showed an increasingly pessimistic outlook.

Turkish stocks also took a tumble, slipping 0.8 percent while MSCI’s emerging market benchmark was flat on the day.

Meanwhile in Argentina, candidates allied with President Mauricio Macri enjoyed sweeping victories in Sunday’s mid-term election, strengthening his position in Congress while dimming prospects for a political comeback by his predecessor Cristina Fernandez.

Investors have said they want to see Macri push through labour and tax reforms aimed at lowering business costs in Latin America’s third-biggest economy. But they have been worried about a political resurgence by Fernandez, loved by millions of low-income Argentines helped by generous social spending during her administrations.

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

on year

Morgan Stanley Emrg Mkt Indx 1118.54 -1.15 -0.10 +29.72

Czech Rep 1056.24 -0.37 -0.04 +14.61

Poland 2484.09 +18.58 +0.75 +27.53

Hungary 0.00 +0.00 +0.00 -100.00

Romania 7919.00 -14.48 -0.18 +11.77

Greece 743.20 -6.03 -0.80 +15.47

Russia 1130.49 -3.96 -0.35 -1.90

South Africa 51807.55 +206.89 +0.40 +18.01

Turkey 07700.54 -788.15 -0.73 +37.83

China 3382.27 +3.62 +0.11 +8.98

India 32447.30 +57.34 +0.18 +21.86

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2017

Czech Rep 25.68 25.65 -0.10 +5.18

Poland 4.23 4.23 -0.01 +3.99

Hungary 308.13 307.92 -0.07 +0.22

Romania 4.60 4.60 +0.01 -1.34

Serbia 119.10 119.08 -0.02 +3.57

Russia 57.47 57.48 +0.02 +6.60

Kazakhstan 336.11 335.72 -0.12 -0.73

Ukraine 26.54 26.53 -0.04 +1.73

South Africa 13.74 13.63 -0.77 -0.07

Kenya 103.60 103.40 -0.19 -1.19

Israel 3.49 3.49 -0.07 +10.27

Turkey 3.70 3.67 -0.87 -4.75

China 6.64 6.62 -0.26 +4.63

India 65.02 65.03 +0.02 +4.50

Brazil 3.19 3.19 -0.01 +1.89

Mexico 19.03 18.99 -0.22 +8.87

Debt Index Strip Spd Chg %Rtn Index

Sov‘gn Debt EMBIG 302 0 .02 8 04.88 1

Reporting by Karin Strohecker, additional reporting and graphics by Claire Milhench

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