| RIO DE JANEIRO/LONDON
RIO DE JANEIRO/LONDON Feb 28 Ukraine's hryvnia
jumped as much as 10 percent on Friday on hopes of a loan from
the International Monetary Fund, while the Brazilian real slid
0.5 percent after the latest budget data poured cold water on
hopes that the country would halt a deterioration in its fiscal
Russia's rouble gained slightly but stayed near five-year
lows to the dollar on Friday, pressured by fears about
instability in neighboring Crimea.
The rouble and other emerging currencies were also pressured
by jitters over the recent volatility in the Chinese yuan, which
posted its biggest daily fall since China created its foreign
exchange market in 1994.
In Ukraine, armed men have taken control of two airports in
the Crimea region in what the government described as an
invasion by Russian forces, raising fears of an escalation of
tensions between the neighbors and between Moscow and the West.
Russia has denied involvement.
The impact of the crisis in Ukraine continued to be felt
across European emerging markets but is taking a heavy toll on
Russian assets in particular as it comes on the heels of
evidence that the country's economy is slowing.
The rouble fell as much as 0.6 percent to the dollar
before rising slightly. It also hit a fresh record low to the
euro and a euro-dollar basket used by the central bank
. It has lost more than 2 percent this month against
the dollar, taking its losses since the start of 2014 to 9
"Ukraine is a trigger, not a cause," said Per Hammerlund,
chief EM strategist at SEB in Stockholm. "We have generally a
bearish view on the rouble, primarily because of fundamentals,
but recent turmoil in Ukraine is contributing to a push lower."
He noted that Russia's current account surplus was shrinking
while the central bank is losing reserves as it intervenes in
currency markets at the pace of $400 million a day.
Russian stocks touched a new three-week low and have
lost 3.5 percent so far this week.
In Ukraine, however, despite the Crimean tensions, there
were signs of stabilization on financial markets after the
country formed an interim government and said it would abide by
the conditions of any IMF loan agreement.
An IMF mission is due in Kiev next week, raising hopes of a
loan that will stave off bankruptcy and default. Meanwhile the
central bank slapped curbs on deposit withdrawals from banks.
The hryvnia which fell to record low beyond 11 per dollar on
Thursday, briefly traded at 9.80 per dollar, a rise of 10
percent on the day, while the country's dollar bonds were around
half a point stronger across most maturities.
BRAZIL BUDGET DISAPPOINTS
Brazil's stocks and currency slid after the central
government said its primary budget surplus fell in January, in a
weak start for the government's efforts to boost savings and
regain credibility with investors this year.
The weak fiscal numbers raised questions about President
Dilma Rousseff's ability to deliver a primary budget surplus of
1.9 percent of gross domestic product in 2014, despite spending
pressures stemming from her re-election campaign.
The announcement of Brazil's fiscal goal last week had been
considered realistic by many investors, helping reduce market
pessimism toward the country over the past few days.
"Market pressure had abated since the announcement of the
fiscal target, but today's numbers raise doubts about that
commitment," said Eduardo Velho, chief economist with INVX
Global in Sao Paulo.
The real lost 0.5 percent on Friday after
strengthening about 3 percent since last Thursday's announcement
of the primary fiscal surplus target, which equals to government
budget savings before debt service.
Brazil's benchmark Bovespa index dropped 0.9
percent, also knocked down by a 5.4 percent drop in shares of
steelmaker CSN, which posted an unexpected loss in
the fourth quarter.
Broader emerging equities tracked by a benchmark MSCI index
were up 0.4 percent to a one-month high, buoyed by
gains on Chinese stocks and comments by U.S. Federal Reserve
chairman Janet Yellen.