Rouble awaits rate decision; strong dollar drags on currencies

Rouble awaits rate decision; strong dollar drags on currencies
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Feb 11 (Reuters) – Russia’s rouble firmed on Friday after the Russian central bank hiked interest rates as expected as inflation runs rampant, while most emerging stocks eased on rising bets of a more hawkish Federal Reserve.

The rouble strengthened to 74.92 to the dollar, before trading back at 75, after the central bank raised its key interest rate to 9.5%, a 100-basis-point hike for the second time in a row. Russian inflation hovers near a six-year high and geopolitical tensions surrounding Ukraine affects the risk appeal of the currency. read more

The central bank raised the key interest rate seven times in 2021 from a record low of 4.25% but the monetary tightening failed to subdue inflation pressures, which the bank targets at 4%.

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“The question is whether geopolitical tensions and second-round impacts of the latest increase in prices will allow for inflation to actually recover to those levels, especially given the current level of 8.7% and the fact that business price expectations are continuously growing,” said Ima Sammani, an analyst at Monex Europe.

Several emerging market central banks have consistently hiked their interest rates this year in a bid to rein in inflation pressures with Brazil, Mexico and Chile being the most aggressive in monetary policies.

With U.S. inflation fuelling expectations of heftier and faster interest rate hikes from the Fed, those behind the curve such as Turkey have a tough year ahead of them.

Asian central banks have been trying to balance economic growth with inflation with China starting to ease policy. read more

Emerging market central bank interest rates

MSCI’s index of emerging market currencies (.MIEM00000CUS) and stocks (.MSCIEF) fell on Friday but was still on track to end its second consecutive week higher.

Data analysed by BofA showed emerging market equity funds had enjoyed a seventh straight week of inflows, sucking in $5.3 billion in the week to Wednesday. read more

Turkey’s lira fell 0.2% despite a set of positive data that showed forecast-beating industrial production in December, while its current account deficit widened to $3.841 billion, lower than Reuters forecasts of a $4 billion deficit. read more

Meanwhile, Turkish central bank surveys showed that consumer price inflation in the country is set to jump to 34.06% at the end of 2022, much higher than initial projections of 29.75%.

Hungary’s forint rose 0.1% against the euro. Hungarian consumer prices grew at their fastest rate in almost 15 years in January, data showed, supporting the case for further interest rate hikes.

For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance in 2021, 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

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Reporting by Shashank Nayar in Bengaluru; Editing by Catherine Evans and Nick Macfie

Our Standards: The Thomson Reuters Trust Principles.

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