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Best Q2 in 7 years for emerging market currencies

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Most emerging market currencies firmed up against the dollar on Wednesday, on track to post gains for June and the second quarter, and traders are keeping an eye on US employment data to be released in late June. this week for clues on the economic recovery and the Federal Reserve’s stance.

The Turkish lira added 0.6% and the South African rand rose 0.4%. The rand was scheduled to post its first monthly drop in five, down 4% in June so far to be one of the worst performers in emerging markets this month.

Credit to the private sector in South Africa contracted 0.42% year-on-year in May from a 1.76% contraction in April, central bank data showed on Wednesday.

The MSCI Emerging Market Currencies Index established as the weakest month since March, but the second strongest quarter since 2014.

Emerging market currencies are in a better position to handle potential rate hikes and any cuts by the Fed, compared to the 2013 crisis, Commerzbank analyst Thu Lan Nguyen said, as many countries like Brazil, Mexico, Russia and Turkey have already started to generate local interest. rates this year.

But that doesn’t mean the coins are out of the woods just yet. Most of them may be fundamentally in a better position … but we urge caution as the improvement is likely largely due to weaker demand as a result of the pandemic. “

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Belarusian bonds were flat after the United States on Tuesday banned the sale of tickets for air travel to and from Belarus, after Minsk forced a Ryanair flight to land and arrested a dissident journalist on board. Belarus and its president Alexander Lukashenko have faced strong criticism for the incident, prompting sanctions from the European Union.

The Belarusian ruble was up 0.3% against the dollar, set in its best quarter since the same time last year.

Looking ahead to emerging markets, several of which seek income from tourism, the outlook looked bleak with a United Nations study on Wednesday showing that international tourist arrivals will stagnate this year, causing as much as $ 2.4 trillion. in losses.

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The sector is not expected to fully recover until 2023, according to the study.

Among equities, an index of emerging markets equities fell as a strong Wall Street carryover faded as investors looked to US employment data on Friday. The index was on track to mark its fifth consecutive quarter of gains, more than 4%.

But gains were a far cry from 17.3% in the same period last year when stocks rallied in hopes of reopening earnings after a sharp pandemic-driven slide in March.

For CHARTS on emerging markets currency performance in 2021 see http://tmsnrt.rs/2egbfVh For CHARTS on MSCI emerging market index performance in 2021 see https://tmsnrt.rs/2OusNdX

For TOP NEWS in emerging markets

For the CENTRAL EUROPE market report, see

For the TURKISH market report, see

For the RUSSIAN market report, see

(Reporting by Susan Mathew in Bengaluru; edited by Uttaresh.V)

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In-depth reports on the economics of innovation from The Logic, presented in association with the Financial Post.

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