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EMERGING MARKETS-Turkish lira flat before central bank meeting; zloty sinks

Thu, 22nd Oct 2020 09:27

* Turkish central bank expected to raise rates- Reuters poll

* Polish zloty loses about 0.5%

* Central bank meetings in Israel, Ukraine expected

By Ambar Warrick

Oct 22 (Reuters) - Turkey's lira was barely moving on
Thursday ahead of an expected interest rate increase by the
central bank, while the Polish zloty dropped in the face of
strict restrictions to contain the coronavirus.

The zloty sank about 0.5% to the euro, leading
losses among its central European peers after Poland's prime
minister said he would recommend imposing the highest level of
coronavirus restrictions nationwide, after a new record of more
than 10,000 daily cases.

Most other emerging market currencies in Europe, Middle East
and Africa weakened as coronavirus cases continued to rise.

The Turkish central bank faces the dual challenge of a
sinking lira and spiking inflation, and is expected to raise
rates by 175 basis points to 12%, a Reuters poll showed. It had
unexpectedly increased rates in September.

Concerns over Turkey's diminishing foreign exchange
reserves, coupled with tensions in the Caucasus and Cyprus had
pushed the lira to record lows earlier in the month.

"The monetary policy committee (MPC) might think that an
average funding rate/policy rate of about 12% might be adequate
to bring inflation lower to its end-2021 forecast of 8%,"
analysts at Credit Suisse wrote in a note.

"Given the lack of policy visibility, we still find it
difficult to have a strong conviction about the MPC’s move
today."

Turkish stocks were about 0.3% higher, while most
other emerging market equities were mostly flat or slightly
lower. The MSCI's index of emerging market stocks fell
0.2%.

Markets were also looking ahead to central bank meetings in
Israel and Ukraine. Both central banks are expected to make no
changes to their benchmark rates.

Russia's rouble shed about 0.5% to the dollar as oil
prices sank after a build in U.S. gasoline inventories pointed
to a coronavirus-driven demand drought.

Elsewhere, credit ratings agency S&P cut Zambia's credit
rating to "selective default" after the government missed an
interest payment last week and announced it would suspend debt
service to external commercial creditors.

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 Ambar Warrick in Bengaluru. Editing by Jane
Merriman)

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