Views Article – Sharenet Wealth

Asia, Forex

Emerging market FX claws back some lost ground, stocks dip

* China’s yuan firms after stronger-than-expected central bank fix

* Shanghai Composite ends at lowest level since Feb. 21, down 1.6%

* Russia’s rouble, Turkey’s lira gain against the dollar

* MSCI’s EMFX index edges further away from Monday’s 2019 low

By Aaron Saldanha

Aug 6 (Reuters) – Emerging market currencies firmed against the dollar on Tuesday, although risk appetite was tepid after the United States labelled China a currency manipulator, triggering fears of worse trade ties between the two countries.

U.S. Treasury Secretary Steven Mnuchin said on Monday the government had determined that China was manipulating its currency. China’s yuan firmed 0.3% on Tuesday following a stronger-than-expected central bank fix.

“The yuan is not a free-floating currency,” Societe Generale’s Global Head of FX Strategy Kit Juckes wrote in a note.

“Arguing that it’s a very undervalued one is hard, but FX is in the political spotlight and the dollar will remain under pressure. Today’s lack of data may allow corrections after yesterday, or room for a war of words.”

The yuan smashed through the key 7 yuan-per-dollar level on Monday, a day which saw MSCI’s emerging market currencies index hit its lowest level this year. The benchmark ticked 0.1% higher on Tuesday.

“The sentiment between the U.S. and China is clearly at a low point during the trade talks and it will be very hard to get to a trade deal,” wrote Allan von Mehren, chief analyst and China economist at Danske Bank, in a note.

“It poses the risk that both sides scrap the idea of reaching a deal and instead fight a long trade war.”

MSCI’s developing world stocks index slipped 0.2% on Tuesday, hurt by index heavyweight China falling 1.6%, while Chinese blue-chips slid 1.1%.

Hong Kong-traded stocks slipped 0.7%, while South Korean equities declined 1.5%.

Turkey’s lira firmed 0.6%, while stocks rose 1.1%. Shares of the country’s banks were up 2%, lifted by a 17.1% surge in Turkiye Kalkinma Bankasi after it reported a jump in second quarter profit.

Russia’s rouble strengthened 0.5%, while Moscow-traded stocks advanced 0.8%, aided by a 0.6% rise in the price of oil, a key Russian export, which helped energy stocks.

South Africa’s rand strengthened 0.9% and equities rose 0.7% helped by financials and consumer staples.

Emerging European currencies broadly firmed against the euro, with Poland’s zloty 0.1% stronger and Hungary’s forint was 0.2% firmer.

(Reporting by Aaron Saldanha in Bengaluru; Editing by Kirsten Donovan)

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