* Turkish lira breaches 8.2 to USD, 9 a possibility
* Russian rouble leads FX losses
* South African rand drops ahead of mid-term budget
* CEE currencies fall
Oct 28 (Reuters) - Turkey's lira touched a new low for a
third day on Wednesday as the country's inflation outlook
worsened and a surge in the novel coronavirus and uncertainty
over the U.S. election weighed on other emerging markets in
Europe, Middle East and Africa.
The lira sank more than 0.7%, breaching 8.2 to the
dollar. The Turkish Central Bank raised its 2020 inflation
forecast, but pledged to use all its tools to tighten monetary
policy because of the risks posed by weakness in the lira.
The currency's weakness has been triggered by the central
bank standing pat on interest rates, when geopolitical tensions
in the Caucasus and the eastern Mediterranean have shaken
investor faith in the country.
"There is no reason USD/TRY could not overshoot to a level
such as 9.00 in coming weeks," Tatha Ghose, FX & EM analyst at
Commerzbank wrote in a note.
"While rate hikes by the central bank would no longer act as
a credible long-term policy response, we get the sense that a
large emergency rate hike might be the only policy response we
see in an attempt to break the momentum."
The rouble led losses across EMEA, dropping 0.9%
ahead of a month-end deadline for local exporters to convert
foreign currency earnings. Weak oil prices and a continued spike
in local coronavirus cases also weighed on the currency.
The South African rand fell 0.7% ahead of a mid-term
budget report from Finance Minister Tito Mboweni. The report
will lay out high-level spending priorities for the next three
South African consumer price inflation fell in September as
pressure from the coronavirus dissuaded consumption.
Central European currencies such as the Hungarian forint
, the Polish zloty and the Czech crown
fell between 0.2% to 0.5% to the euro, as rising virus
cases in the region raised the possibility of new curbs on
In China, the yuan weakened after some banks
tweaked a methodology for fixing the currency's daily midpoint.
The implied one-week currency volatility of the offshore yuan
spiked to its highest level since Jan 2016 ahead of
the U.S. elections.
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
For TURKISH market report, see
For RUSSIAN market report, see
(Reporting by Ambar Warrick in Bengaluru; editing by Barbara