* Read up 1.3% this week
* Rand worst weekly performance, down more than 2%
* The Polish zloty lags its peers in the EEC this week
By Ambar Warrick
July 16 (Reuters) – The South African rand dominated gains in emerging market currencies on Friday as it slashed large weekly losses on civil unrest fears, while the Turkish lira was among the best performers this past week, with low volatility favoring high yielding currencies.
The rand rose 0.6%, but is expected to lose more than 2% this week after a wave of violence ravaged the country’s major financial centers. The currency was the worst performing Emerging Markets Unit (EM) this week.
MSCI’s currency index was set to end a two-week losing streak, building on gains in the Chinese yuan. But an increase in Asian COVID-19 cases has marred the broader sentiment, while fears of slower growth kept risk appetite moderate.
Losses in Asian markets pushed the MSCI Emerging Markets Equity Index down 0.5%. But the index was expected to end the week up about 1.8%, much of the gain coming from assurances from Federal Reserve Chairman Jerome Powell that policy would remain accommodative.
The Turkish lira rose about 0.4% on Friday and is expected to overtake its peers in Europe, the Middle East and Africa (EMEA) with a gain of 1.3%.
The currency has slowly risen since the central bank held interest rates this week and pledged to hold them until inflation is brought under control, although analysts have argued that further tightening was needed. necessary to contain inflation.
However, with the bank expected to maintain the status quo, the pound’s volatility indicators hit a year-old low. And with benchmark rates of 19%, the pound is one of the most profitable currencies in the world.
But with that return comes the risk of further government interference in monetary policy, which has seen the lira collapse to record levels.
“The ‘stringency’ of the current position remains questionable, in our view, and we believe that the broadly accommodative nature of (the central bank’s) guidance is unjustifiable given the predominant upside risks to the inflation outlook,” Credit Suisse analysts wrote in a recent note.
In central Europe, the Polish zloty has lagged its peers this week, as the country’s central bank maintained interest rates this week, unlike hikes in Hungary and the Czech Republic.
For the CHART on the performance of emerging markets forex in 2021, see http://tmsnrt.rs/2egbfVh For the CHART on the performance of the MSCI emerging index in 2021, see https://tmsnrt.rs/2OusNdX
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(Reporting by Ambar Warrick; Editing by Shailesh Kuber)