By Claire Milhench
LONDON, Aug 23 (Reuters) - South Africa's rand led emerging market currency losses on Thursday, down more than 1 percent after U.S. President Donald Trump tweeted his concerns on land reform, while the rising risk of further U.S. sanctions on Russia knocked the rouble.
Emerging currencies were on the backfoot anyway as the dollar index .DXY rebounded 0.3 percent in the wake of minutes from the U.S. Federal Reserve's last meeting indicating it would raise rates in September. rand ZAR=D3 took the brunt of the selling, down 1.4 percent, after Trump tweeted late on Wednesday that he would ask his Secretary of State Mike Pompeo to look closely at changes to land reform proposed by the ruling African National Congress (ANC) party. ANC is forging ahead with plans to change South Africa's constitution to allow the expropriation of land without compensation, and Trump's comments have inflamed the debate. Africa sovereign dollar bonds fell across the curve while five-year credit default swaps rose 8 basis points (bps) from Wednesday's close to 215 bps according to IHS Markit data.
"The market has become a little too obsessed with tweets," said Cristian Maggio, head of emerging markets strategy at TD Securities.
"I am concerned about land reform but I don't see why markets should be more concerned if Trump is asking Pompeo to check what's happening - it's a purely domestic sovereign matter for South Africa."
Russia's rouble RUB= was the other big faller, down 1.1 percent after its weakest close since 2016, and heading towards its lowest in more than two years as traders priced in a growing risk of more U.S. sanctions.
"It's a concern and keeping the rouble weak, and it is likely to be the case until the U.S. midterm elections as the fiery rhetoric has been stepped up," said Maggio.
"The risk is we are getting into a completely new area in terms of the extent and reach of the sanctions as so far they have been aimed at individuals and specific firms and not at hitting government debt directly."
Russian stocks .IRTS also remained under pressure, with dollar-denominated shares down 1.2 percent.
Russia's economy minister acknowledged that new U.S. sanctions would pressure the rouble and fuel capital outflows over the next 12 months, recognising the need to trim the economic growth forecast. a sign of the widespread fear among banks of reprisals from Washington for working with targeted Russian individuals and entities, Credit Suisse (SIX: CSGN ) froze roughly $5 billion of assets linked to Russia. Turkish lira TRY= also fell another 0.8 percent after Ankara accused Washington of waging "economic war" and failing to respect its legal system over the fate of an American pastor whose trial in Turkey has soured relations between the NATO allies. national security adviser John Bolton said Turkey had made a "big mistake" in not freeing pastor Andrew Brunson.
Emerging equities also struggled as more tit-for-tat tariffs were imposed in the ongoing trade dispute between the United States and China, even as officials from both sides met to try to resolve the damaging conflict. benchmark emerging stocks index was effectively flat on the day, with ratings agency Moody's warning that the trade war was a risk to global growth. market countries remain inherently vulnerable to the risk of capital outflows associated with tightening global liquidity as advanced economy central banks reverse their quantitative easing measures," Moody's added.
Chinese mainland shares .CSI300 gained 0.3 percent but Hong Kong .HSI fell 0.5 percent and emerging Europe bourses delivered meagre gains with Poland .WIG20 and Hungary .BUX stocks up 0.3-0.4 percent.
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
Net Chg % Chg % Chg
Morgan Stanley (NYSE: MS )
Emrg Mkt Indx .MSCIEF 1051.59
+0.98 +0.09 -9.22
+3.37 +0.31 -0.17
+6.74 +0.29 -6.45
36531.69 +165.79 +0.46 -7.23
-9.90 -0.12 +5.49
+4.06 +0.56 -9.83
1051.54 -13.80 -1.30 -8.91
.JTOPI 52102.79 +41.18 +0.08 -0.82
.XU100 90185.99 +1451.23 +1.64 -21.80
2724.63 +10.02 +0.37 -17.61
.BSESN 38312.90 +27.15 +0.07 +12.50
close currency currency
% change % change
68.03 -1.29 -16.34
South Africa ZAR=
14.16 -1.40 -13.95
6.03 -0.62 -37.55
4.04 +0.03 -18.02
Index Strip Spd Chg %Rtn Index
Sov'gn Debt 11EML EMBIG 386
.03 7 73.29 1
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.