The ruble falls to record lows; Latam FX, stocks slide

  • Morgan Stanley backtracks on its bullish bets on emerging markets
  • Polish zloty and Hungarian forint hit historic lows
  • South African Rand Finds Support as Gold Prices Rise
  • Colombian Peso and Peruvian Sol outperform Latam FX

March 7 (Reuters) – Emerging market currencies tumbled on Monday, with the Russian rouble, Polish zloty and Hungarian forint hitting record highs, as oil prices surged on speculation Western countries could ban the Russian crude, sparking global inflation fears.

Most of the currencies of commodity-rich Latin American countries also fell, with oil rising above $130 a barrel as the United States and the European Union considered the possibility of banning imports of Russian oil following the invasion of Ukraine by Moscow. Russia calls the campaign a “special operation”.

“The main concern is that inflation in (Latam) could be higher than expected,” said Alberto Rojas, vice president of Latin America economics at Credit Suisse.

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“Countries like Mexico and Colombia have been under significant pressure on energy and food prices; these pressures are likely to intensify.”

The Mexican peso fell 1.5% to lead losses among its Latam peers, while the Brazilian real fell 0.2%.

Outperforming its peers, the Colombian crude exporter’s peso rose 0.5%, while the Peruvian copper producer’s soil firmed 0.9%. As gold prices soared amid increased appetite for safe havens, the South African rand also hit 0.2%.

Brazilian energy giant Petrobras fell nearly 4% despite the oil surge as Brazilian President Jair Bolsonaro on Monday backed moves to cut domestic fuel prices.

Most Latam stock indices fell between 0.5% and 2%, while the MSCI gauge for emerging market stocks (.MSCIEF) fell 3.3%, to a 16-month low. The Eastern Europe index (.MIME00000PUS) fell 13% after its worst weekly performance on record last week.

Morgan Stanley said on Monday it stood by its fundamental view that currencies of developing economies and the bonds of some countries would continue to climb, but was resuming its bullish bets after November’s surge.

The ruble plunged more than 17% to a low of 134.7 against the dollar on the interbank rate. Trading on the Moscow MOEX exchange is expected to remain closed until Wednesday. Read more

“The combination of Western sanctions, growing default risk and the push to divest ruble-denominated assets will likely weigh more on the currency,” said Ipek Ozkardeskaya, senior analyst at Swissquote.

The currencies of Central and Eastern European countries (CEECs), which are heavily dependent on Russian oil, were hit.

The Hungarian forint slipped to an all-time low of 399.38 against the euro, while the Polish zloty weakened to a record low of 4.99 per euro.

Meanwhile, analysts fear that an impending rate hike by the US Federal Reserve could further strengthen the dollar, which could hurt emerging market currencies.

Major Latam currencies and stocks at 1909 GMT:

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Reporting by Shreyashi Sanyal, Anisha Sircar, Bansari Mayur Kamdar and Susan Mathew in Bengaluru Editing by Mark Potter and Lisa Shumaker

Our standards: The Thomson Reuters Trust Principles.

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