By Ambar Warrick
Aug 3 – Emerging market currencies retreated on Monday as rising coronavirus cases and concerns over the U.S. economy weighed on investor sentiment, while most stocks inched higher.
South Africa’s rand was among the worst performing currencies in Europe, Africa and the Middle East, hurt by increased safe-haven demand as concerns arose over a slowing U.S. economic recovery from the pandemic.
Currencies in Hungary and the Czech Republic also fell to the euro, while gold benefited from the risk-off sentiment.
The dollar, which marked its worst month in a decade in July, rose amid some squeezing out of crowded short positions and safe-haven demand.
“If there is one lesson to be learned from the performance of the USD in July then that rising corona infection numbers are really bad for sentiment on the FX market,” Esther Reichelt, FX and EM Analyst at Commerzbank, wrote in a note.
“In the absence of new momentum from monetary policy, focus during corona times rests exclusively on the real economy. What is decisive for the FX market is the question which countries will emerge from the crisis quickly and well.”
Markets are now looking to a data-heavy week of inflation and business activity readings, as well as employment figures from the United States on Friday.
While recent data has indicated some economic recovery from lows hit during the height of the pandemic, the possibility of new lockdown measures seems likely to upset the fledgling uptrend.
Polish stocks were a touch higher, while the zloty fell to the euro after factory activity in the country expanded for the first time since late-2018 in July.
Most EMEA stocks and currencies had marked strong gains in July, as they continued to recover from pandemic-led losses. Optimism over a possible vaccine, along with some improving economic indicators, had also helped.
Russia’s rouble shrugged off weak oil prices and strengthened slightly, as the end neared of a dividend payout period that tends to pressure the currency.
Chinese stocks closed higher after data showed improving factory activity, spurring some gains across broader emerging markets.
Turkish markets were closed for a holiday.
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 Subhranshu Sahu)