March 28, 2023
Currencies in Emerging Markets Gain as Dollar Loses Strength

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On Wednesday, currencies in the emerging markets were on a rebound from the declines they had experienced earlier this week. Russia’s rouble ended up snapping a losing run of three days, and the Turkish Lira also strengthened in hopes of a rate hike by the central bank this week. There was a 0.8% gain in the rouble this week, after it shrugged off a decline in the oil prices, as the US dollar weakened once more as opposed to a basket of major peers. 

Earlier this week, the currency had ended up hitting a three-week low and this was primarily because of a sell-off in global markets due to increased concerns about a new variant of the COVID-19 virus that appeared to be more infectious and had broken out in Britain as well as anti-Russian sanctions. On Tuesday, US President Donald Trump threatened to not sign the $892 billion coronavirus aid package that had finally been agreed upon in Congress and it comprises of desperately required money for individual Americans. He said that they should amend the bill to increase the amount promised in stimulus checks.

However, markets decided to look past the threat of the US president, as they believe that the bill will be amended and signed in the next few weeks. There was a gain of 0.4% in the Turkish Lira, as investors were waiting for the outcome of a meeting of the central bank on Thursday. It is expected that Turkey’s central bank will increase their key interest rate by almost 150 basis points. The purpose of doing so is to reduce inflation and increase credibility under Naci Agbal, the new governor. There was also a 0.2% jump in the South African rand, even though it had been hammered this week.

This is because countries all over the world had also shut their borders to South Africa after it was discovered that it also had a mutated version of the coronavirus strain, much like Britain. As far as Central European currencies are concerned, they remained adrift against the Euro, with Poland’s zloty and Hungary’s forint both down by 0.1% due to the uncertainty surrounding the prospect of a Brexit trade deal. According to Britain’s ITV, a Brexit trade deal between the European Union and Britain is possible today later, after there had been some progress made in regard to fishing rights. 

In March, a snap election will be held in Israel after the parliament failed to meet a deadline on Tuesday for passing a budget. This triggered a ballot, which brings about new challenges for the country’s Prime Minister, Benjamin Netanyahu. However, the shekel didn’t react much to the news that there will be a fourth parliamentary election in the country in the last two years, as the currency ended up actually gaining against the US dollar by almost 0.2%. As long as Brexit trade deal remains uncertain and the new strain continues to spread, emerging markets will also remain quite volatile.

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