By Claire Milhench
LONDON, July 23 (Reuters) - The Turkish lira firmed on Monday after comments from the finance minister cemented expectations of an interest rate hike this week, but emerging equities struggled in the face of new trade war threats.
The lira TRY= rose 0.8 percent against the U.S. dollar, leading emerging currency gains, ahead of Tuesday's central bank meeting. Markets expect rates to rise 100-125 basis points after inflation hit a 14-year high in June. expectations were strengthened when finance minister Berat Albayrak was quoted as saying that Turkey would not fight with markets but pursue a "win-win" relationship with them. strategist Piotr Matys said Albayrak's comments were "constructive", highlighting his defence of central bank independence and economic reforms.
But he warned Albayrak would have to follow these positive comments with concrete measures, "and if that happens then confidence amongst investors should be gradually restored".
Matys expects a 100-basis-point rise to 18.75 percent but warned that if Turkey held rates, that would be a negative signal, reigniting concerns about central bank independence.
These concerns had intensified after Turkey's President Tayyip Erdogan made his son-in-law treasury and finance minister. Erdogan has repeatedly called for lower interest rates so Albayrak is being watched to see if he will take a more orthodox line.
Sentiment towards emerging assets remained subdued, however, following threats from U.S. President Donald Trump on Friday to impose tariffs on all $500 billion of imported goods from China. yuan CNH= retreated 0.4 percent in offshore markets, though Chinese mainland stocks .CSI300 .SSEC bounced about 1 percent, with investors relieved that new draft rules on banks' wealth management products were unlikely to crimp liquidity. Rusal's Hong Kong-listed shares 0486.HK leapt almost 15 percent to a 3-1/2-month high after the U.S. Treasury said it was open to removing the aluminium producer from the U.S. sanctions list. shares .IMOEX rose 0.7 percent and the rouble RUB= firmed 0.6 percent, underpinned by oil prices hurdling $73 LCOc1 a barrel. O/R For GRAPHIC on emerging market FX performance 2018, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2018
Net Chg % Chg % Chg
Morgan Stanley (NYSE: MS )
Emrg Mkt Indx .MSCIEF 1070.44
+0.37 +0.03 -7.60
+2.10 +0.19 +0.83
2203.44 +20.52 +0.94 -10.47
35377.42 +190.90 +0.54 -10.16
7966.70 +68.61 +0.87 +2.75
+1.74 +0.23 -5.77
1130.56 +15.97 +1.43 -2.07
.JTOPI 50215.67 -688.53 -1.35 -4.41
.XU100 95366.88 +1284.55 +1.37 -17.31
2859.52 +30.25 +1.07 -13.54
.BSESN 36561.69 +65.32 +0.18 +7.35
close currency currency
% change % change
South Africa ZAR=
4.79 +0.73 -20.35
3.77 -0.03 -12.11
Index Strip Spd Chg %Rtn Index
Sov'gn Debt 11EML EMBIG 360
.03 7 79.95 1
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