Concerns about COVID are weighing on Chinese markets, but Central and Eastern European currencies are growing

Concerns about COVID are weighing on Chinese markets, but Central and Eastern European currencies are growing

Emerging world equities dipped on Monday as Chinese stocks plummeted as the country’s continued COVID-19 problem outweighed the positive news from US President Joe Biden that tariffs on Chinese products could be reduced. Stocks in emerging markets declined 0.2 percent. Stocks in China and Hong Kong declined 0.6 percent and 1.2 percent, respectively, after Beijing announced the largest number of COVID-19 cases recorded during the current outbreak, as well as profit-taking following two weeks of advances. The region’s currencies rose 0.1 percent. The Chinese yuan rose to its highest level since May 5 after US President Joe Biden said he was considering lowering tariffs on Chinese goods. Central European currencies firmed, lifted by a weaker dollar and a positive mood in global markets. Retail sales in Poland rose 33.4% year-over-year in April, compared with the estimated 30.6%, boosting the Polish zloty 0.5% up against the euro.

The Russian rouble rose 3% against the dollar, supported by capital controls and an upcoming month-end tax period. The Russian central bank also denied a media report it has started purchasing foreign currency in order to stop an uncontrolled strengthening of the rouble. Turkey’s lira inched 0.2% lower in choppy trading after central bank data showed business confidence among Turkish manufacturers fell to 109.4 points in May compared with 109.7 points in April. The South African rand ticked 0.2% higher after the S&P revised the country’s outlook to “positive” on Friday. For GRAPHIC on emerging market FX performance in 2022 For GRAPHIC on MSCI emerging index performance in 2022.

“We are seeing further tentative signs of improvement in market sentiment,” said Piotr Matys, senior FX analyst at In Touch Capital Markets. “Another set of very strong Polish data, which is an indication that households continue to spend money despite high inflation as disposable income of Polish households is being protected by still high wages.” The Hungarian forint rose 0.5%, tracking broader gains, even as data showed consumer and business confidence worsened in May as households turned gloomier amid a surge in inflation. The Czech crown gained 0.4% after Governor Jiri Rusnok said on Sunday the central bank will likely raise interest rate further in June if economic data are in line with the bank’s latest forecast.

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