* Belarusian ruble at 2.518 per dollar
* Chinese yuan at its highest for three years; The US-Chinese talks before our eyes
* MSCI EMFX at a new high; up more than 3% from 2021 lows
* Russian stocks break records
By Susan Mathew
May 27 (Reuters) – Emerging market currencies extended their gains for a fifth straight session on Thursday to hit another high, with the Chinese yuan hitting a three-year high, although impending sanctions prompted warnings on the rating of sovereign credit of Belarus.
Belarusian bond yields continued to rise and the ruble fell 0.7%, which is expected to see its biggest drop in seven weeks, as countries rerouted flights to avoid Belarus after the government forced a passenger flight to land there to arrest a dissident journalist.
Credit rating agency S&P Global said on Tuesday it could downgrade Belarus’ credit rating if Western governments impose stronger economic sanctions on the country. He put a negative outlook on the note last September after contested presidential elections sparked protests and government repression.
The Chinese yuan, meanwhile, strengthened 0.3%, up for a fifth consecutive session. The currency is up almost 13% from last year.
The United States and China are expected to resume trade talks this week after a long hiatus following the change of government. The “phase 1” trade agreement signed in January 2020 remains in effect, but the Chinese side has repeatedly called for the reduction in tariffs adopted under the Trump administration.
“Given US President Joe Biden’s fierce opposition to higher tariffs, the result is likely either the status quo or partial removal,” said a group of Maybank analysts led by Saktiandi Supaat.
“The risks are therefore biased downwards for the USDCNH for these events.”
The MSCI Emerging Market Currency Index rose 0.2% to a new high. The index has gained more than 3% since hitting this year’s low in March, thanks to big central banks adopting easy monetary policies as the global economy tries to rebound from a crisis caused by the coronavirus pandemic.
The dollar has traded steadily, not far from recent lows, with the focus now on upcoming US data to measure inflationary pressures. The U.S. personal consumption report is due Friday, while gross domestic product and jobless claims figures are due later today.
The Turkish lira and Russian ruble ignored the initial sluggishness to rise by around 0.2% each, while in South Africa the rand continued its winning streak until day six, peaking in February. 2019.
Emerging market stocks were flat, with mainland Chinese stocks closing at their highest level in three months, while Russia’s MOEX fell 0.2% after hitting record highs in the last session .
For GRAPHIC on the performance of emerging market currencies in 2021, see http://tmsnrt.rs/2egbfVh For GRAPHIC on the performance of MSCI emerging indices in 2021, see https://tmsnrt.rs/2OusNdX
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For the report on the Russian market, see (Reporting by Susan Mathew in Bengaluru; Editing by Hugh Lawson)
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