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EMERGING MARKETS-Turkey's lira tumbles on worries of crisis as dollar firms

Wed, 12th Aug 2020 09:39

* Lira stumbles as investors await decisive c.bank action

* EM stocks falter as U.S. stimulus talks stall

* Russian rouble, S.African rand weaken against dollar

By Shreyashi Sanyal

Aug 12 (Reuters) - The Turkish lira resumed its sharp fall
on Wednesday on investor worries of a full-blown currency
crisis and as a firm dollar made it more vulnerable to a
squeeze, while emerging market stocks fell on doubts over
coronavirus aid in the United States.

The lira weakened 1.7% to 7.32 against the greenback,
as investors looked for more substantial moves from the Turkish
central bank to stave off a meltdown in the currency amid
concerns over depleted reserves and costly state FX
interventions.

The central bank's decision to halt cheaper funding that had
allowed primary dealers to borrow well below its policy rate
helped support the lira in the previous session but the optimism
did not carry through to Wednesday.

Commerzbank FX analyst, Esther Reichelt, said these backdoor
channels to stabilize the currency should be regarded as
temporary.

"Credible and permanent interest rate hikes are necessary to
control inflation and stabilize the Turkish lira. It is
therefore probably only a matter of time before USD-TRY trades
above 7.40."

The dollar extended a bounce from last Friday against
a basket of currencies as U.S.-China tensions ratcheted higher
following President Donald Trump's ban on U.S. transactions with
the Chna-based owners of video-sharing app TikTok and messaging
app WeChat.

The MSCI's index for emerging market stocks fell
0.2%, as a stalemate between the Republican White House and
congressional Democrats over coronavirus relief entered a fourth
day without talks on Tuesday, with each party blaming the other
for intransigence.

Most Asian markets declined, along with a rapid selling of
gold. A fall in prices of the yellow metal also hurt miners in
South Africa, which pushed the country's main equity index
0.5% lower.

South Africa's Sasol extended declines with a 9%
fall as it warned on Tuesday it will report an annual loss after
a drop in oil and chemical prices and the impact of the
coronavirus pandemic hit earnings.

The rand eased against the dollar, as did Russia's
rouble.

Unrest in Belarus also remained in focus, as Sweden's
foreign minister said she had been invited to an extraordinary
European Union foreign affairs meeting on Friday to discuss
potential sanctions on the country following Sunday's
presidential election there.

Currencies in central and eastern Europe including Hungary
, Poland, Romania and the Czech
Republic, were mostly lower against the euro.
For GRAPHIC on emerging market FX performance in 2020, see http://tmsnrt.rs/2egbfVh
For GRAPHIC on MSCI emerging index performance in 2020, 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 Shreyashi Sanyal in Bengaluru; editing by Emeia
Sithole-Matarise)

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