OSLO: Aug 14 Major emerging currencies tumbled to record and multi-year lows on Friday as domestic troubles were compounded by the fallout from a turbulent week for the yuan, with emerging market shares on track for their fourth week of losses.
Following China’s surprise currency devaluation on Tuesday, the yuan held steady against the dollar on Friday after suspected intervention by the central bank aimed at settling volatile markets into a range and curb expectations the currency will fall into a depreciation cycle.
But the yuan posted its biggest weekly loss on record, adding more pressure in a bruising week for emerging currencies.
Turkey’s lira weakened 0.6 percent after hitting a record low against the dollar following the breakdown of talks on forming a coalition government, which raises the prospect of a snap election this autumn.
South Africa’s rand slipped 0.2 percent after hitting the weakest level in 14-years with investors fretting over the health of Africa’s second largest economy. And Russia’s rouble eased 0.3 percent, weighed down by lower oil prices, and edging back towards a six-month low hit earlier in the week.
(Chinese yuan) weakness following China’s decision to change its exchange rate regime has made itself felt in EMs,” Barclays analysts wrote in a note to clients.
Concerns about China growth, the competitiveness challenge for EM manufacturing economies and the potential disinflationary effect a (Chinese yuan) devaluation could have through import prices have all pushed EM FX weaker.”
For the rouble, it was the eight consecutive week in the red, while the lira looked set to weaken for the fourth week and the rand was on track for weekly losses.
Emerging Asian currencies were also poised for weekly losses with Malaysia’s ringgit hitting a fresh 17-year low as falling crude prices raised concerns over its oil exports.
Shares on many Asian bourses were lower, with MSCI’s broadest emerging market share index slipping 0.2 percent on the day and on track for the fourth straight week of losses. Yet shares in China mainland stocks closed flat to higher on Friday, with the Shanghai Composite Index chalking up the biggest weekly gains in two months.
Assets across Central and Eastern Europe painted a mixed picture, with currencies giving up some of the previous session’s gains after economic output data from Poland, Hungary and Romania fell short of expectations.
The zloty, forint and leu all weakened against the euro. The crown held steady after Czech economic data came in better than expected
Shares in Prague rose 0.4 percent and stocks in Bucharest edged also higher, but indexes in Warsaw and Budapest racked up losses.
