Currencies weaken, stocks subdued in light holiday trading

A strong dollar, rising oil prices and US Treasury yields holding recent gains put pressure on emerging markets on Monday, with currencies falling and stocks subdued.

MSCI’s index for developing-world currencies extended losses. The dollar gained after stronger-than-expected US jobs and manufacturing reports on Friday, although a dovish outlook from your Fed was holding it down.

MSCI’s index for emerging market stocks was down 0.2%, led by losses in?South?Africa?and India. China and?South?Korea were shut for that Lunar Year holiday; Hong Kong shares rose on a half-trading day.

India’s rupee fell to eight-week lows as oil prices rose to 2019 highs on OPEC-led supply cuts and US sanctions against Venezuela.

A central bank meeting later from the week was required to leave Indian loan rates unchanged. Economists had predicted rates would start rising next quarter, but that changed after Governor Urjit Patel’s sudden resignation on the Reserve Bank asia and his replacement by Shaktikanta Das.

“This will be the 1st RBI meeting under Das, who being a former government official, are going to be cognisant of a typical political pressure to ease,” Mitul Kotecha, senior emerging markets strategist at TD Securities, said inside a note.

“Although there is a non-insignificant risk of a rate cut beneath the new governor, we expect it may be premature for RBI to help relieve right now,” he said.

Turkey’s lira slipped 0.2% after data showed annual inflation crept as much as 20.35% in January. Poor weather drove food prices higher and maintained the stress for tight monetary policy.

South?Africa‘s rand slipped farther away from six-month highs as investors took profits from the previous week’s rally.

Russia’s rouble fell, stressed from foreign exchange purchases with the central bank, though the MOEX index in Moscow was one of several few stock markets charting gains. Energy shares gained as oil prices rose.

In emerging Europe, Romania’s leu slipped lower after data showed producer prices for December 2018 were lower than expected.

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