Aug 12 - China's heavy lending numbers and increased business scrutiny, political tensions in Turkey, Mexico and Peru, and central bank decisions in Poland headlined emerging market moves on Thursday. The MSCI index of emerging market stocks fell 0.4% as Chinese shares dropped with scrutiny on the online insurance sector being the latest in a series of crackdowns. Online insurer ZhongAn tumbled 11.4%.
Combined with rising COVID - 19 cases, worries outweighed a positive handover from Wall Street where data showing depressing U.S. inflation growth assuaged fears about a rush to taper monetary stimulus.
As this dented currency, riskier currencies caught a break with an index of EM currencies looking to snap a four-session losing streak.
The Chinese yuan speculated between minor gains and losses and markets speculated if the recent fall of new bank loans made nine-month lows warranted an easing in monetary policy.
The demonetization of Turkish lira was top 0.4% ahead of the 1100 GMT central bank decision. While President Erdogan has called for a reduction in interest rates, inflation has risen to 18.95%, about shy of the key interest rate at 19%.
Analysts expect the bank to stay on hold for at least this meeting as well.
We are approaching a conclusion game where we would either witness rate cuts in the coming months or another direct intervention from President Tatha Ghose, an FX and Em analyst at Commerzbank.
The lira is the worst performing EU currency so far this year, down 13%, thanks largely to Erdogan's interference in monetary policy – replacing hawkish central bank chief earlier in the year.
The Polish Zoloty was little changed. The currency had fallen on Wednesday after the country's prime minister dismissed the head of a junior coalition partner from the government, creating uncertainty over the future of the administration.
Meanwhile, House legislators a bill on Wednesday that the opposition in Warsaw says aims to silence a U.S.-owned news channel critic of the government, leading to a swift denunciation from the United States.
The rand of South Africa fell 0.2%. The outlook for the currency has turned cautious amid protests and a new finance minister is trying to revive the economy.
Capital Economics is meanwhile downbeat about commodity currencies prospects.
The prices of most commodities have fallen recently and we expect them to decrease in China primarily due to slower growth in China, said Jonathan Petersen, an economist at Capital Economics, adding that higher U.S. Treasury yields will also weigh.