May 3 (Reuters) – Most emerging market currencies weakened on Monday as the dollar firmed at the start of a week packed with key U.S. economic data, while a slightly lower-than-forecast inflation reading helped support the Turkish lira.
The lira inched higher to trade at 8.29 per dollar after falling to 8.33 earlier in the session.
Trading volumes were thin across the board, however, with London markets closed for a public holiday.
Data showed Turkish annual inflation climbed to 17.14% in April, its highest level in nearly two years, driven by a sagging lira and pricy commodity imports. Still, the battered currency found relief as the numbers came in lower than a Reuters poll forecast of 17.3%.
The central bank estimated last week that inflation would peak in April and decline to 12.2% by year-end. Policymakers will meet on Thursday, and market participants expect them to keep the policy rate unchanged at 19% and start cutting in third quarter.
“Another steady CBRT meeting outcome may drag USD-TRY back towards 8.20, but this would create a buying-on-dips opportunity, in our view, as we expect a 400bp easing this year in Turkey, starting in July,” Unicredit analysts wrote in a note.
Russia’s rouble fell 0.4% to 75.44 versus the dollar, tracking weaker oil prices as a deadly second wave of coronavirus infections in the world’s third largest consumer of oil, India, raised demand concerns.
Trading activity in Russia is likely to be thinner than usual for the rest of the week after President Vladimir Putin declared May 4-7 non-working. However, the country’s two largest stock exchanges will remain open and the central bank will carry out its regular market.
The MSCI’s wider index of EM currencies slipped to a one-week low earlier in the session as the dollar clung to a recent bounce ahead of a raft of U.S. economic data this week, including the ISM manufacturing survey and April payroll numbers.
An index of EM equities slipped 0.6% as Asian heavyweights including China and Thailand were closed and Russian stocks tumbled.
For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see https://tmsnrt.rs/2OusNdX
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For RUSSIAN market report, see (Reporting by Shashank Nayar in Bengaluru)