Stocks, FX set for third weekly decline; US jobs data in focus -October 06, 2023 at 05:24 am EDT
* EM stocks, FX eye weekly declines
* Moody’s downgrades Egypt deeper into junk territory
* India’s central bank holds rates; signals tight policy
* Czech policymakers debate chance of rate cut this year –
minutes
Oct 6 (Reuters) – Emerging market currencies and stocks
continued to recover on Friday ahead of a keenly-awaited U.S.
jobs report that will be crucial in shaping interest rate
expectations, though both asset classes were on track for a
third straight week of losses.
MSCI’s index of emerging markets stocks climbed
0.7%, while currencies added 0.1% by 0856 GMT.
Both indexes got some respite at the end of a bruising week,
which saw investors flee riskier assets following a rout in bond
markets on expectations that the Federal Reserve would keep
monetary policy tighter for longer.
For the week, however, EM stocks have shed 1.6% so far,
while currencies are down 0.3%.
While the bond market turmoil has cooled for now, analysts
say the U.S. non-farm payrolls report due at 1230 GMT will be
crucial in determining how long U.S. monetary policy would
remain restrictive, and consequently shape the outlook for
emerging markets assets.
“The pause in the bond selloff is granting some room for
recovery for most currencies against the dollar,” said Francesco
Pesole, FX strategist at ING in a note.
“Today’s U.S. payrolls are, however, the big event of the
week and a strong read could easily put markets back on a
bearish track and reignite aggressive dollar buying.”
In central and eastern Europe, the Czech crown was
flat against the euro after central bank minutes showed
policymakers debated whether it might be possible to start
cutting borrowing costs before the end of this year.
Meanwhile, Egypt’s sovereign dollar bonds dropped nearly 3
cents after ratings agency Moody’s downgraded the north African
country’s credit rating to ‘Caa1’ from ‘B3,’ citing worsening
debt affordability.
The Indian rupee was muted against the dollar after
the country’s central bank kept its key lending rate steady as
widely expected, but signalled it would keep rates high and
liquidity tight.
“The vulnerability of inflation to supply shocks, as seen in
the past two months, and still steady momentum in growth,
suggests little reason for a change in approach,” Barclays
analysts wrote in a note.
Meanwhile, the Russian rouble weakened to an over seven-week
low past 101 against the dollar, pressured by lower oil prices
and reduced supply of foreign currency from exporters.
For GRAPHIC on emerging market FX performance in 2023, see http://tmsnrt.rs/2egbfVh
For GRAPHIC on MSCI emerging index performance in 2023, see https://tmsnrt.rs/2OusNdX
For TOP NEWS across emerging markets
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see
(Reporting by Johann M Cherian and Amruta Khandekar in
Bengaluru; Editing by Varun H K)
