EMERGING MARKETS-Lira falls as inflation spikes, rupiah hits 20-yr low
By Claire Milhench
LONDON, Sept 3 (Reuters) - Turkey's lira led emerging currency losses on Monday after inflation spiked to almost 18 percent in August, while the Indonesian rupiah fell to its lowest level since the Asian financial crisis.
The lira TRY= was down 1.5 percent after Turkish consumer price inflation rose to a near 15-year high of 17.9 percent in August, up 2.3 percent month-on-month. Producer prices leapt 32.13 percent. central bank comments that the inflation outlook showed "significant risks" to price stability and that it would adjust its monetary stance at its upcoming meeting on Sept. 13 in line with this view helped contain the losses. market is taking this as a signal for a rate hike at that meeting," said Inan Demir, senior emerging economist at Nomura International.
"They should hike the one-week repo rate by about 500-550 basis points to address the deterioration in inflation – whether they will be able to do that is another question, but this is what is needed."
Turkey's Finance Minister Berat Albayrak told Reuters the central bank was independent of government and would take all the necessary steps. He also reiterated the currency sell-off posed no risk to the country's banks. five year credit default swaps fell 10 basis points (bps) from Friday's close to 569 bps, while Turkish stocks .XU100 rose 1.5 percent.
This was despite the fact that Turkish manufacturing activity contracted for the fifth consecutive month in August as output and new orders slowed on the back of the currency crisis. another sign of the pressure on emerging currencies, the Indonesian rupiah IDR= fell 0.7 percent to its lowest level since the Asian financial crisis in 1997-1998. rupiah has weakened nearly 9 percent against the dollar so far this year, one of the worst affected currencies in the emerging markets sell-off, despite repeated interventions from the central bank. Indonesia's inflation picked up in August, but remained within the central bank's target range. stocks .JKSE fell 0.9 percent, while five-year credit default swaps rose to an eight-week high of 131 bps, according to IHS Markit data. a brighter note, Argentina's peso, which plummeted last week, firmed over 6 percent ARS=RASL on Friday after the central bank auctioned $250 million in dollar reserves and the International Monetary Fund issued a strong statement of support for President Mauricio Macri's government. Indian rupee INR= also firmed 0.2 percent from last week's record lows after economic growth surged to 8.2 percent, its highest in more than two years. However, manufacturing growth unexpectedly slowed in August as domestic demand softened. factory activity data from across emerging markets helped push MSCI's benchmark emerging stocks index .MSCIEF down 0.5 percent to one-week lows.
China's factory activity grew at the slowest pace in more than a year in August, reinforcing views of a cooling in the world's second largest economy as the trade dispute with the United States drags on. United States is still set to impose 25 percent tariffs on $200 billion of Chinese goods once a public comment period ends on Thursday. mainland shares .CSI300 fell 0.4 percent, despite the inclusion of another tranche of stocks in MSCI's EM index. Hong Kong shares slipped 0.6 percent weighed down by another 2.5 percent fall in Tencent 0700.HK amid China's crackdown on online gaming. big fallers included South Korea .KS11 , down 0.7 percent after factory activity contracted for a sixth successive month. Warsaw shares .WIG20 rose 1.05 percent, although Poland's manufacturing growth was at its lowest in 22 months. The zloty also firmed 0.2 percent EURPLN= against the euro.
Hungary's forint EURHUF= weakened a touch, with some disappointment that Fitch did not upgrade Hungary's sovereign rating in a review on Friday. For GRAPHIC on emerging market FX performance 2018, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2018, see http://tmsnrt.rs/2dZbdP5
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 ) Emerging Markets Prices from Reuters
Equities
Latest
Net Chg % Chg % Chg
on year
Morgan Stanley (NYSE: MS )
Emrg Mkt Indx .MSCIEF 1050.49
-5.47 -0.52 -9.32
Czech Rep
1075.41
+2.53 +0.24 -0.26
Poland
2360.81 +22.85 +0.98 -4.08
Hungary
37187.35 -46.05 -0.12 -5.56
Romania
8297.08 +22.54 +0.27 +7.01
Greece
722.49
-7.13 -0.98 -9.96
Russia
1087.08
-5.21 -0.48 -5.83
South Africa
.JTOPI 52465.90
+1.89 +0.00 -0.13
Turkey
.XU100 93901.73 +1178.34 +1.27 -18.58
China
2720.74
-4.51 -0.17 -17.73
India
.BSESN 38586.22 -58.85 -0.15 +13.30
Currencies
Latest
Prev
Local
Local
close currency currency
% change % change
in 2018
Czech Rep
EURCZK=
25.75
25.76 +0.03
-0.86
Poland
EURPLN=
4.29
4.30 +0.17
-2.75
Hungary
EURHUF= 326.68
326.42 -0.08
-4.94
Romania
EURRON=
4.64
4.64 -0.00
+0.87
Serbia
EURRSD= 118.01
118.06 +0.04
+0.33
Russia
67.88
67.47 -0.60 -15.06
Kazakhstan
KZT=
365.77
363.57 -0.60
-9.01
Ukraine
28.38
28.23 -0.53
-0.83
South Africa ZAR=
14.75
14.68 -0.46 -16.21
Kenya
KES=
100.60
100.60 -0.00
+2.49
Israel
ILS=
3.61
3.60 -0.27
-3.78
Turkey
TRY=
6.61
6.52 -1.38 -42.67
China
CNY=
6.82
6.83 +0.17
-4.58
India
INR=
70.84
71.00 +0.23
-9.90
Brazil
4.05
4.05 +0.00 -18.31
Mexico
19.16
19.08 -0.40
+2.57
Debt
Index Strip Spd Chg %Rtn Index
Sov'gn Debt 11EML EMBIG 399
0
.02 7 66.33 1
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