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EMEA FX Risk Rally Pauses, but Weekly Gains on Lap

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Jan 22 Reuters Most emerging market currencies in Europe, the Middle East and Africa fell on Friday as a risk rally paused, but were still set for weekly gains on the back of supportive central bank actions and optimism over more U.S. stimulus.

Emerging market EM stocks also came off record highs, but were on track for strong gains for a fourth straight week.

EM currencies had come off recent gains late on Thursday as concerns over the rapid spread of the coronavirus and the timing of vaccine programmes in developing economies prompted some profit taking.

But optimism over a bumper U.S. stimulus package, as well as continued monetary and fiscal support saw most currencies set for weekly gains.

EM stocks were also set to outperform their peers in the developed world for the week.

We believe the Biden administrations focus on tackling the pandemic and supporting the economic recovery bodes well for EM assets, which have stabilized after an eventful start to the year, Christian Keller, head of economics research at Barclays wrote in a note.

Turkeys lira fell about 0.9 on Friday, but was set to add 0.6 for the week after the central bank held interest rates and promised tight policy to battle doubledigit inflation and any lira weakness.

Since president Tayyip Erdogan has recently called for rates to be brought down again as soon as possible the market was watching for signs that central bank of Turkey may be backing away from further hikes, Tatha Ghose, FX and EM…

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