Rouble Ends Losing Run, Emerging Stocks Extend Losses

Turkey’s lira hit new lows on Wednesday as tensions with Greece persisted, while the Russian rouble ended a three-session losing run which was driven by mounting political pressure over the poisoning of Kremlin critic Alexei Navalny, Reuters informed.

Market sentiment was fragile as a tech rout extended on Wall Street overnight and as AstraZeneca suspended trails of its leading COVID-19 experimental vaccine.

“A return to the pre-corona normality that many had hoped for is not foreseeable, and that is ruining sentiment. Not just in the stock markets, but particularly there,” said Ulrich Leuchtmann, an FX analyst at Commerzbank.

A strong dollar put currencies under pressure, while MSCI’s index of emerging market stocks hit a five week low and extended losses to a sixth straight session – the longest such streak since late January.

Gains in stock indexes in Turkey, Russia and South Africa which tracked a higher open in western European bourses, helped cut some losses for the EM index.

Russia was in focus again with the rouble up 0.6% after hitting a fresh 4-1/2 month lows. GDP data due later on Wednesday is expected to show a 8.5% drop in Russia’s economy in the second quarter ahead of a central bank policy meeting next week.

“We still do not see the central bank cutting the policy rate in the next non-core meeting,” said Alexey Pogorelov an analyst at Credit Suisse. “At the same time, if volatility in the FX market normalizes, the central bank may deliver another cut in its last core meeting of the year, on 23 October.”

In Belarus, the currency hit a two-week high against the dollar even as Germany floated the prospect of EU sanctions against key players, focused on President Alexander Lukashenko, as protests over a disputed election continued.

Turkey’s lira slid to 7.49 to the dollar after talks between Turkish and Greek officials at NATO headquarters on how to avoid a military escalation in the eastern Mediterranean were delayed.