Turkey's lira on course for worst week in a year as dollar surges

Turkey's lira on course for worst week in a year as dollar surges

The EM stocks are going to fall by 1.5% by the end of the week.

CEE stocks fell in November Updates after EM currencies reversed to losses, adds CEE moves Nov 19 Reuters - A rebound in Turkey's battered lira was short-lived on Friday, putting it on course for its worst week since March, while Poland's zloty fell to its lowest in more than a decade.

MSCI's index of emerging market currencies hit two week lows as the dollar surged over the euro's weakness.

Russia's rouble, reversal of session gains, hit near two-month lows with falling oil prices hurting the crude exporter's losses, while the South African randAfrican rand fell 0.6%.

The EM index was on course to end the week down about 0.4% after a bruising few days marked by the strong dollar, the possibility of higher core yields and the possibility of lira wobbles.

After strengthening up to 1.7% earlier in the session, the lira moved back beyond 11 to the dollar, extending losses to a ninth straight session. It is expected to lose about 13% over the period.

It hit a new low of 11.3 to the dollar on Thursday after the central bank ignored rising inflation to bow to political pressure, cutting the key interest rate by 100 basis points to 15% and signalling another cut next month.

Shilan Shah, senior economist at Capital Economics said that the impact of a currency crisis in Turkey wouldn't be significant because EM currencies don't seem like they need a significant adjustment and as foreign investors have pared back their exposure to Turkey after years of erratic policymaking and crises.

JPMorgan turned underweight on emerging markets, the Middle East, and Africa due to the prospect of more entrenched inflation, as well as higher bond yields in developed markets.

Despite the steep losses for the euro, the currencies of most emerging central and eastern European CEE economies fell against the single currency because of concerns over rising COVID 19 cases.

Hungary's forint fell by 0.8% to snap a four-session gaining streak, while Poland's zloty fell for the seventh in eight sessions, falling for the seventh in eight sessions.

The zloty has been under pressure due to a migrant crisis at its border with Belarus, which has sparked wider geopolitical tensions.

EM stocks slumped by 0.5%. Steep losses for Alibaba led Asia fell, while main indexes fell between 0.6% and 2% in Russia, South Africa, Poland and Hungary.

November has been the worst month for CEE stocks in a year. They have outperformed EM peers and world stocks so far in 2021.