Currencies firm after Putin hints at progress in talks with Ukraine

  • Putin sees ‘some positive changes’ in talks with Ukraine
  • The MSCI stock index is expected to fall 4.7% this week
  • The ruble strengthens in offshore trading

Mar. 11 – Most emerging market currencies rose on Friday after Russian President Vladimir Putin hinted at progress in Moscow’s talks with Ukraine, easing selling pressure on units battered by the ongoing war .

Putin said “there are some positive changes, the negotiators on our side tell me,” but did not elaborate. Read more

The news helped buoy financial markets, battered by concerns over mounting global inflationary pressures and the fallout from Russia’s invasion of Ukraine. Read more

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The Russian ruble hit a session high of 112.09 against the dollar in offshore trading, while the onshore rate also rose slightly.

Local stock markets remained largely closed on orders from the central bank, which restricted trading in stocks and bonds after the West imposed economic sanctions on Russia.

Western sanctions against Russia have spurred a rise in commodity prices, which has benefited some exporters of oil, gold and other commodities in emerging markets, but hurt importers and the economies of countries close to Ukraine and Russia.

The Turkish lira climbed 0.6% against the dollar after weakening as much as 1.2% earlier in the session, while the commodity-rich South African rand edged up 0.2 %, erasing earlier declines.

“The economic blow is real and we are not sure we have yet fully grasped the scale of the financial aftershocks that result from the decommissioning of the financial construction of one of the world’s largest commodity producers,” Francesc Balcells, Chief Investment Officer of Global Emerging Markets Debt at FIM Partners wrote in a client note.

The MSCI Emerging Markets Equity Index (.MSCIEF) pared some losses and fell 0.9%. The index is on track for its fourth weekly decline, down around 4.7%.

Tensions in Ukraine put pressure on the risk appetite of emerging markets amid fears of impending monetary tightening cycles in the developed world to contain global inflationary pressures.

Data on Thursday showed US inflation hit a four-decade high, further bolstering bets that the Federal Reserve will raise its key rate at the end of its policy meeting next week, while the European Central Bank has also surprised with a warmongering tone.

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Reporting by Shreyashi Sanyal in Bengaluru; Editing by Robert Birsel and Emelia Sithole-Matarise

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