World Markets

EMERGING MARKETS-EMEA FX falls; Turkish lira set for worst month since 2018 crisis

Credit: REUTERS/MURAD SEZER

Turkey's lira led losses across emerging markets in Europe, Middle East and Africa on Friday, and was set for its worst month since the 2018 crisis, weighed by rising coronavirus cases and uncertainty over the U.S. presidential election.

By Ambar Warrick

Oct 30 (Reuters) - Turkey's lira led losses across emerging markets in Europe, Middle East and Africa on Friday, and was set for its worst month since the 2018 crisis, weighed by rising coronavirus cases and uncertainty over the U.S. presidential election.

The lira TRY= dropped 0.6%. The currency has been plumbing record lows every day this week as the central bank unexpectedly held lending rates, despite elevated inflation levels in the country.

Geopolitical tensions in the Caucasus and the eastern Mediterranean also exacerbated the lira's decline, putting it on course to lose 7.9% to the dollar in October, its worst monthly decline since the height of the 2018 economic crisis.

Meanwhile, data showed Turkey's trade deficit almost tripled in September, while foreign visitor arrivals more than halved in the month, indicating further pain for the lira.

Russia's rouble RUB= fell 0.2% to the dollar, pressured by investors pricing in a possible downside from Democratic candidate Joe Biden winning the U.S. election on Tuesday, which could result in more sanctions against Moscow.

Weakness in oil prices, spiking coronavirus cases and a month-end deadline for local exporters to convert foreign currency also weighed on the rouble and put it on pace to shed 2.2% against the dollar in October.

EMEA stocks were all lower, while the MSCI's index of emerging market stocks .MSCIEF fell 1.1%. Still, the index was set to post monthly gains thanks to strength in some Asian heavyweight companies.

However, with a fresh wave of coronavirus-driven lockdowns in Germany and France, and jitters ahead of the U.S. elections, the outlook for emerging markets was constrained in the near-term.

"The results of the U.S. elections next week may provide some broader signals as to whether the 'reflation trade' in EM has run its course or further gains may lie ahead," said Christian Keller, global head of economics research at Barclays.

The Czech crown EURCZK= was muted, shrugging off data showing better-than-expected third-quarter economic growth.

In Asia, Taiwan's preliminary third-quarter GDP beat forecasts, while Hong Kong's third-quarter GDP fell 3.4% from last year.

Their currencies were both flat against the dollar.

Markets are also watching for third-quarter GDP data from the European Union due later in the day.

Elsewhere, Sri Lankan government bonds were set for large weekly declines amid increasing scrutiny from the United States over the country's economic relationship with China.

For GRAPHIC on emerging market FX performance in 2020, see http://tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance in 2020, see https://tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

(Reporting by Ambar Warrick in Bengaluru; Additional reporting by Karin Strohecker; Editing by Amy Caren Daniel)

((Ambar.Warrick@thomsonreuters.com; +91-80-6182-2837; Reuters Messaging: ambar.warrick.thomsonreuters.com@reuters.net; Twitter: @AmbarWarrick))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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