EMERGING MARKETS-Rising treasury yields pressure emerging market currencies

  • Reuters
  • Stock Market News
EMERGING MARKETS-Rising treasury yields pressure emerging market currencies
Credit: © Reuters.

* MSCI EM currency index on course for worst day in 4 weeks

* Turkey's lira down 0.3%, S. African rand extends losses

* EM stock index up for 9th day, Taiwan shares surge to new highs

By Susan Mathew

Feb 17 (Reuters) - Emerging market currencies weakened on Wednesday, extending losses to a second day, as rising U.S. bond yields put the dollar on-track for its best session in two weeks.

Benchmark ten-year Treasury yields US10YT=RR hit a one-year high to trade near pre-pandemic levels, as vaccine rollouts and stimulus measures spurred bets of a likely spike in inflation as the global economy recovers from a coronavirus-induced slump. US/ MKTS/GLOB

MSCI's index of emerging market currencies .MIEM00000CUS slipped 0.3% and was on course to post its worst session in four weeks, as the dollar rode the yield trade higher. FRX/

"The extended bond sell-off somewhat (and temporarily) derailed FX momentum and weighed on non-USD FX," said a team of analysts at Maybank led by Saktiandi Supaat, head of FX research.

"That said, we believe pro-cyclical and commodity-linked FX should still benefit if global growth rebound continues to show up alongside smooth roll-out of vaccination to other nations."

Turkey's lira TRY= slid 0.3% ahead of a central bank meeting due Thursday in which it is expected rates will be kept on hold at 17%. The currency has risen about 14% since late November when it began a largely steady move higher as the central bank began hiking rates. from the central bank indicating a tight monetary policy for some time to come has kept the currency buoyed. In January, the bank stood pat on rate with inflation on an uptrend. Africa's rand ZAR= extended losses after Citi took profit in its three-month bet on the rand versus the dollar. in Russia's rouble RUB= were limited by oil prices staying near 13-month highs. O/R

Among stocks, Turkey .XU100 and Russia .IMOEX were muted following a dip in most Asian peers.

An index of developing market stocks .MSCIEF , however, rose 0.3%, marking its ninth straight session in the black, with Taiwan shares .TWII rocketing to new highs in a catch-up rally as they returned from a holiday period.

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 CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

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