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Russian rouble up with eyes on c.bank; EM stocks, FX make cautious gains

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09/18/2020 | 04:19am EDT

* EM FX index at seven-month high, set for best week since June 5

* S.African rand snaps six sessions of gains

* EM stocks up almost 2% this week

* EM equity funds outflows $2.5 bln in the week to Sept. 16 - BofA

Sept 18 (Reuters) - Russia's rouble rose on Friday ahead of a central bank meeting where benchmark rates are expected to be kept unchanged, while the broader emerging market currencies index was back at seven-month highs as worrying U.S. data weighed on the dollar.

MSCI's index of developing world currencies rose 0.3%, set to end the week up more than 1% - its biggest gain since early-June, as vaccine hopes, anticipation of a dovish Fed and U.S. jobless claims still staying high, kept the greenback largely weaker this week.

The rouble firmed 0.3%. Expectations for the rate to be held at 4.25% grew stronger after the rouble slid to a six-month low against the dollar and its weakest levels since 2016 versus the euro earlier this month.

In a week that has seen oil prices surge almost 10%, the petro currency is set to end with slight losses as fears that the West may impose new sanctions on Russia in relation to its possible meddling in the political crisis in neighbouring Belarus and the suspected poisoning of Kremlin critic Alexei Navalny, weighed.

"The recent data were not in favor of an immediate policy rate cut, while elevated geopolitical risks and weaker rouble should make the decision even less obvious," said Credit Suisse analyst Alexey Pogorelov.

Asian currencies marched higher, but gains elsewhere were more reluctant with South Africa's rand retreating from six-month highs a day after the central bank held back on cutting rates, as expected.

Turkey's lira slipped for the sixth straight session, inching closer to new lows. The currency, down almost 22% this year, is set to mark its third week in the red pressured by worries about depleting foreign exchange reserves and tensions with Greece.

Emerging market stocks resumed their rise after a day's decline. Sentiment, however, remained fragile as the U.S. data cast doubts on the pace of global economic recovery from a pandemic-induced slump.

The index, comfortably at pre-pandemic levels, is set to end higher for the first time in three weeks, up almost 2%.

Emerging market equity funds saw $2.5 billion outflows in the week to Sept. 16, Bank of America Global Research showed, but developing debt funds enjoyed an eleventh straight week of inflows.

In central and eastern Europe, currencies firmed against a steady euro after coming under pressure over sharply rising COVID cases in the region, especially Czech Republic. Hungary's forint rose for the first since Sept. 9.

For GRAPHIC on emerging market FX performance 2020, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance 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 Susan Mathew in Bengaluru; editing by Uttaresh.V)

Stocks mentioned in the article
ChangeLast1st jan.
BANK OF AMERICA CORPORATION 1.77% 24.14 Delayed Quote.-31.46%
LONDON BRENT OIL -0.58% 42.58 Delayed Quote.-34.86%
US DOLLAR / RUSSIAN ROUBLE (USD/RUB) -0.33% 77.05 Delayed Quote.25.29%
WTI -0.56% 41.093 Delayed Quote.-33.36%
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