Rand, ruble lead emerging FX falls; lira in surprise 1.2 pct gain


The South African rand and Russian rouble were pummeled by weaker commodity prices yesterday, leading a wider fall in emerging currencies, while the Turkish lira bucked the trend with a 1.2 percent jump versus the dollar.

The surprise winner of the day was Turkey's lira, which rose 1.2 percent, despite Fitch's decision on Friday to cut the sovereign rating to ‘junk' and Standard & Poor's unexpected move to lower the outlook on Turkey's rating to "negative" from "stable".

Analysts said Fitch's move had been expected and priced in already for Turkey, which depends on foreign investment flows to fund its current account deficit - one of the biggest in the G20. However, Turkey's lira was still on track for an 8 percent fall - its worst monthly decline for a January in 23 years.

MSCI's emerging equity index eased 0.4 percent in thin trading, with many of the Asian markets that are its biggest components shut for Lunar New Year holidays.

Bourses elsewhere mostly slipped, tracking world shares amid concerns about the impact of the new U.S. administration's trade and economic policies after President Donald Trump introduced immigration curbs over the weekend.

While the dollar stayed flat versus a basket of currencies, lower oil and commodity prices dragged South Africa's rand and Russia's rouble lower.

"Oil has come down a bit and that is weighing on the rouble, and some of the commodities like platinum, which suggests there may be a correction in metals prices as well, so it's a bit of risk off on weaker commodity prices," said Per Hammarlund, chief emerging market strategist at SEB.

South Africa's rand weakened as much as 1.6 percent to touch its weakest in nearly two weeks before recouping some of its losses, hit also by media reports that President Jacob Zuma was considering firing ministers who opposed him.

Russia's rouble slipped 0.5 percent against the dollar, pressured also by expectations of dollar purchases by the finance ministry to shield the economy from oil price swings and to shore up foreign currency reserves.

According to Rosbank, a local subsidiary of Societe Generale, daily forex purchases could total $100 million. The government will disclose planned purchase amounts by the end ofthe week. In central Europe, Romania's leu gained 0.6 percent - its steepest daily gain in a year - after the government delayed approving controversial public spending plans for the second time in three days amid political infighting over the size of the budget for intelligence agencies.