By Asher Levine and Natsuko Waki
RIO DE JANEIRO/LONDON Feb 13 Growing fears of a
default pushed Ukraine's debt-insurance costs to four-year highs
on Thursday, while concern over economic growth and inflation
drove Latin American assets lower.
Higher U.S. Treasury yields also weighed on emerging
markets, bringing losses in South Africa's rand, the
Turkish lira, Russian rouble and Hungarian forint
, some of the worst-hit currencies in the sell-off that
began last month. Nigeria's currency rebounded,
however, following a central bank intervention.
Concern has been growing over how Ukraine can prop up its
currency and pay off its debt. Russia suspended a $15 billion
bailout after Ukrainian President Viktor Yanukovich sacked his
prime minister late last month.
"Ukraine is on the knife-edge of solvency risk," said
Gabriel Sterne, an economist at broker Exotix.
The Ukrainian central bank brought in temporary currency
controls last week after the hryvnia fell below 9 per dollar for
the first time in five years. The bank said on Thursday controls
may last longer than two weeks, as the currency continued to
Investors were not convinced the central bank could continue
to defend the hryvnia. The currency weakened further on
Thursday, losing 1.5 percent against the dollar, and Ukraine's
5-year credit default swaps rose further, gaining 116 basis
points from Wednesday's close to 1,241 bps, according to Markit.
Hungary's forint fell 0.8 percent to 311.75.
Investors are watching inflation data due Friday for clues on
whether rates will be cut again next week. Hungary's benchmark
rate is already at a record-low 2.85 percent.
Higher U.S. Treasury yields weighed on sentiment as
investors moved money from emerging-market assets into the
recovering U.S. economy.
The benchmark emerging equity index fell 1
percent, with Chinese, Indian and Russian
shares all weaker.
In Latin America, both Brazil's real and Mexico's
peso weakened slightly. MSCI's Latin American stock index
fell the most in more than a week.
A proposed increase in consumer electricity rates has
heightened inflation expectations in Brazil, where yields on
interest rate futures ticked higher Thursday. Weaker-than-
expected retail sales also sapped risk appetite.
"Some calculations now suggest gross domestic product could
fall into negative territory in the fourth quarter, something
that was (previously) out of the question," said Gustavo
Mendonca, an economist with Saga Capital in Rio de Janeiro.
A plunge in Banco do Brasil SA shares helped drag
Brazilian stocks down. The state-run lender posted
worse-than-expected quarterly earnings and signalled a possible
slowdown in lending this year.
Mexican shares also dropped, following weak earnings
from conglomerate Alfa.
Elsewhere, the Nigerian naira rebounded from a
two-year low against the dollar after the central bank sold an
undisclosed amount of hard currency to lenders to shore up the
currency. Nigerian stocks and bonds got hammered earlier in the
session as investors sold off frontier-market assets.
Africa's second-largest economy and biggest oil producer has
been a top frontier-market investment in recent years. But
political instability is a concern before upcoming elections,
and the central bank has tightened reserve requirements.
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see