* Lira near record lows on geo-political, inflation worries
* Russia's rouble touches five-week high
* EMRG currencies hit 2-month high on weak dollar
By Shashank Nayar
April 26 (Reuters) - A weaker dollar lifted emerging market
currencies to two-month highs on Monday, helping Turkey's lira
stabilise after it fell to a near all-time low on worries about
souring U.S. relations and a dovish policy under a new central
bank chief.
The lira, among the worst performing EM currencies
this year, had sunk as much as 1.3% to 8.48 per dollar earlier
in the session - its closest to a record low of 8.58 hit in
November.
It was last trading up at the 8.3-per-dollar level, with
data showing an improving business confidence among Turkish
manufacturers in April.
U.S. President Joe Biden said on Saturday that the 1915
massacres of Armenians in the Ottoman Empire constituted
genocide, a historic declaration that infuriated Turkey and
worsened frayed relations between the NATO allies.
"What is playing into the lira is the U.S. being ready to
take a hawkish stance in terms of politics, which raises the
fear of Turkish assets falling further," said Jakob Christensen,
head of EM research at Danske Bank.
Turkish assets are particularly sensitive to strains in
relations with Washington given past fallout from U.S. sanctions
and economic threats, including a spat in 2018 with then-
President Donald Trump that sparked a lira crisis and recession.
Furthermore, the lira has been on a significant downtrend
since President Erdogan sacked Naci Agbal as central bank
governor on March 20 and appointed Kavcioglu, who like Erdogan
is a critic of tight monetary policy and has espoused the
unorthodox view that it causes inflation.
"There are lingering concerns that the new central bank
governor will keep dovish policies despite a challenging
inflation outlook, which we expect will further weaken the lira
in the next six months," added Christensen.
The Russian rouble strengthened by 0.3%, touching a
five-week high against the dollar, boosted by fading sanctions
and geopolitical risks after Russia began withdrawing troops
from near its border with Ukraine last week.
The MSCI index of emerging market currencies
also rose 0.3%, reaching a two-month high as weakness in the
dollar benefited risk-driven assets. But a damaging new wave of
COVID-19 infections held back major gains.
The greenback slumped to an almost eight-week low
versus major peers amid speculation that U.S. Federal Reserve
Chairman Jerome Powell will shun talk of tapering bond purchases
at a policy meeting this week.
Most central European currencies slipped, with the Hungarian
forint and Polish zloty down 0.1%.
For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh
For GRAPHIC on MSCI emerging index performance in 2021, 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 Shashank Nayar in Bengaluru
Editing by Mark Heinrich)