EMERGING MARKETS: Stocks hit lowest in 5 weeks, currencies a touch softer

Currencies were range bound in the developing world, the MSCI’s index was flat by 0855 GMT, reports  Reuters. The Turkish lira traded in a narrow range, already down over 23% for the year against the backdrop of sky-high inflation and low interest rates.

Emerging market stocks touched their lowest in more than five weeks on Monday, while currencies struggled for direction on lingering worries about aggressive monetary tightening tipping the world into a recession. The MSCI’s index for emerging market equities fell 0.4%, down for the third straight session, with Asian regions leading the declines.



Higher rates in the developed world negatively impact emerging market assets, especially with a strengthening U.S. dollar that would make it harder to pay back debt. U.S. Federal Reserve chief Jerome Powell will likely maintain his hawkish tone when he updates U.S. Congress members on the central bank’s inflation fight later in the week. The Fed last week raised interest rates by 75 basis points, in its biggest increase in nearly three decades.


Turkey’s Slow-Motion Currency Crash


EM stocks have lost over 18% so far in 2022, and with the 7.2% drop this month, it is shaping up to be the worst performance in more than two years. Currencies were range-bound in the developing world, and the MSCI’s index was flat by 0855 GMT.


The Turkish lira traded in a narrow range, already down over 23% for the year against the backdrop of sky-high inflation and low-interest rates. “Turkey’s inflation-FX spiral further unfolds, we warn about significant USD-TRY overshooting, which will likely attract sudden announcements and ad hoc intervention by policymakers,” said Tatha Ghose, FX and emerging markets analyst at Commerzbank.


Erdogan’s Lethal Economic Legacy


Leftist Gustavo Petro, a former member of the M-19 guerrilla movement, won Colombia’s presidency on Sunday, the first progressive to do so in the country’s history. All eyes will be on the peso when it starts trading later in the day. South Africa’s rand slipped 0.3% against the dollar, reversing earlier gains. Russia’s rouble steadied near multi-year peaks, supported by capital controls, and may continue firming later this month due to month-end tax payments.

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Published By: Atilla Yeşilada

GlobalSource Partners’ Turkey Country Analyst Atilla Yesilada is the country’s leading political analyst and commentator. He is known throughout the finance and political science world for his thorough and outspoken coverage of Turkey’s political and financial developments. In addition to his extensive writing schedule, he is often called upon to provide his political expertise on major radio and television channels. Based in Istanbul, Atilla is co-founder of the information platform Istanbul Analytics and is one of GlobalSource’s local partners in Turkey. In addition to his consulting work and speaking engagements throughout the US, Europe and the Middle East, he writes regular columns for Turkey’s leading financial websites VATAN and www.paraanaliz.com and has contributed to the financial daily Referans and the liberal daily Radikal.