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EMERGING MARKETS-Turkish lira plumbs new lows, EMEA FX weakens

Credit: REUTERS/MURAD SEZER

Turkey's lira hit a record low on Tuesday and most other emerging market currencies in Europe, Middle East and Africa fell as a rise in coronavirus infections and little progress in U.S. stimulus talks dampened demand for risk-linked assets.

By Ambar Warrick

Oct 27 (Reuters) - Turkey's lira hit a record low on Tuesday and most other emerging market currencies in Europe, Middle East and Africa fell as a rise in coronavirus infections and little progress in U.S. stimulus talks dampened demand for risk-linked assets.

Strains in Turkey's ties with the United States, a row with France, a dispute with Greece over maritime rights and middling monetary policy support from the central bank have weighed on the lira, making it one of the worst performing EMEA currencies this year.

The lira TRY= sank 1% to a new low of more than 8.1 to the dollar, and has shed more than 36% in value this year.

"It would have been difficult for the Central Bank of Turkey to admit more clearly that it is not willing to take any measures to stabilise the inflation outlook and the lira against political pressure," Esther Reichelt, FX & EM analyst at Commerzbank, wrote in a note.

"Increased geopolitical tensions and the threat of U.S. sanctions are exacerbating the lira-negative sentiment further."

Turkish stocks .XU100 were flat, while MSCI's index of emerging market stocks .MSCIEF moved along a similar line.

Sentiment was dampened by Wall Street marking its worst day in a month, while rising coronavirus cases in the United States and Europe bought about new curbs on economic activity.

Markets were also awaiting the outcome of the U.S. presidential election next week.

Russia's rouble RUB= dropped 0.3%, while stocks .IMOEX, .IRTS fell up to 1%. Analysts at Societe Generale posited that recent pressure on the rouble also came from markets pricing in a possible Democrat win in the U.S. election.

"The conventional wisdom is that under Joe Biden, the U.S. administration is likely to mend relationships with traditional allies and be harder on Russia than the Republicans," Societe Generale analysts wrote.

Russian authorities ordered people across the country to wear facemasks in some public places and asked regional authorities to consider shutting bars and restaurants overnight after a surge in coronavirus cases.

Central European currencies fell to the euro, while stocks in the region rose slightly. A spike in local coronavirus cases has also weighed on stocks and currencies recently.

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; Editing by Krishna Chandra Eluri)

((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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