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Home›Hungary economy›New cases of Covid alter sentiment in Asia as Turkish lira rises

New cases of Covid alter sentiment in Asia as Turkish lira rises

By Arthur Holmes
May 17, 2021
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The Turkish lira recovered from near its all-time lows on Monday, as the country lifted some Covid-19 restrictions, while gains in most other emerging market assets were capped by concerns over the increase in virus cases in Asia and disappointing Chinese data.

The lira rose about 1.4% to 8.3256, leading to gains in Europe, the Middle East and Africa (EMEA), after the government said it would allow moves during the day after a strict lockdown imposed nearly three weeks ago.

The currency was set for its best day since early April, after recovering from levels close to an all-time low of 8.5789. Concerns over dwindling foreign exchange reserves, central bank credibility and general risk aversion had hit the lira hard in recent weeks.

Turkish stocks rose 0.6%, with most other exchanges in the EMEA region posting small gains.

Leading the losses among EMEA currencies, the South African rand fell 0.5%, while the Russian ruble fell 0.1% ahead of preliminary first-quarter GDP data due later in the day.

Chilean stocks and the peso were expected to open lower, after the country’s center-right ruling coalition suffered a shock loss as voters backed independents for the body that will draft the new constitution of the country.

“An ‘independent’ constitutional convention suggests a regime of heightened uncertainty ahead,” analysts at JP Morgan wrote in a note.

The Hungarian forint jumped 0.7% to a nearly nine-month high against the euro, after the country’s deputy central bank governor Barnabas Virag signaled the possibility of a hike interest rates in June to fight rising inflation.

General sentiment was dampened after the surge in Covid-19 cases in Taiwan, Singapore and Japan that raised fears of strict restrictions on activity, which would hamper the pace of the nascent economic recovery. Taiwanese stocks plunged nearly 3 percent.

Chinese retail sales largely missed expectations for April, as data shows factories in the country slowed growth during the month, indicating a patchy recovery in the world’s second-largest economy.

“It is still early days, and the impact on the region’s economies will largely depend on the success of the measures currently being deployed. (If) succeed … governments can remove restrictions sooner, allowing economic recovery to return, ”ING analysts wrote in a note.

Emerging markets in Asia have far outpaced their peers this year so far, supported by a more effective fight against the pandemic. – Reuters



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