EMERGING MARKETS – Belarusian bonds slide against EU sanctions; reading it weakens


* MSCI EM stock market index at two week high

* Lira participates in the EMFX rally; a deputy govt of the cenbank replaced

* Belarus will face EU sanctions

* Cenbank Hunagry interest rate decision in the eyes

May 25 (Reuters) – Emerging market equities hit a two-week high on Tuesday as global inflation fears eased, while Belarusian bonds extended their decline amid new European Union sanctions after the forced landing of a dissident.

Developing economy currencies strengthened as accommodative comments from the US Federal Reserve kept pressure on the dollar.

In offshore trading, the Chinese yuan strengthened above 6.4 per dollar for the first time since June 2018. The South African rand strengthened around 0.4% to hit record highs close to two years, while the Russian ruble hit its highest level in more than two months.

The Turkish lira and the Belarusian ruble missed the rally.

The lira weakened by 0.2% after a deputy central bank governor was replaced, two months after President Tayyip Erdogan decided to fire hawk chief Naci Agbal – a move that prompted the lira to take the plunge by almost 15% since then.

The unit had gained more than 17% since November when Naci Agbal was appointed and until his replacement in March.

In Belarus, Eurobond 2030 bonds slipped, as the ruble was set for its worst day in a week against a stronger euro.

European Union leaders agreed on Monday to impose more sanctions on Belarus, including economic sanctions, called on their airlines to avoid Belarusian airspace and authorized work to ban Belarusian airlines from skies and European airports.

“The fall in Belarusian bonds is contained to some extent as investors have pulled out of bonds over the past year due to political tension,” said Trieu Pham, emerging market debt strategist at ING, referring to an outcry against the re-election of the Belarusian leader. Alexander Lukashenko last year who had hammered the Belarusian assets.

On the equity front, the MSCI Emerging Markets Equity Index hit two week highs.

China’s blue-chip stock index added 3%, rising the most in one day since July 2020. The Chinese state planner said he would tighten price controls on key commodities over the years. next five years, a measure seen as a relief for producers struggling with factory inflation. .

South Africa’s benchmark jumped 1%, while Russia’s MOEX rose for a fourth consecutive session.

Ahead of an interest rate decision in Hungary, the forint currency retreated from an eight-month high. The central bank is expected to hold rates ahead before its June meeting where it could deliver its first base rate hike in nearly a decade to contain mounting inflationary pressure.

For GRAPHIC on the performance of emerging market currencies in 2021, see tmsnrt.rs/2egbfVh For GRAPHIC on the performance of the emerging MSCI index in 2021, see tmsnrt.rs/2OusNdX

For TOP NEWS in emerging markets

For the CENTRAL EUROPE Market Report, see

For the TURKISH market report, see

For the report on the Russian market, see

Reporting by Susan Mathew in Bengaluru; Edited by Sherry Jacob-Phillips


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