By Natsuko Waki
LONDON Feb 25 Turkey's lira hit two-week lows
versus the dollar on Tuesday while stocks fell 3 percent after
the latest twist in a government corruption scandal, while
concerns about Chinese yuan moves weighed on other emerging
Ukraine's hryvnia sank to a fresh five-year low but its
sovereign dollar bonds held most of Monday's huge gains as hopes
grew the country would receive Western aid, including from the
IMF, which promotes greater exchange rate flexibility.
Voice recordings were posted on YouTube late on Monday
purportedly of Turkish Prime Minister Tayyip Erdogan telling his
son to dispose of large sums of money on the day news broke of a
graft inquiry into his government.
The incident comes at a sensitive time for Erdogan, whose AK
Party officially began campaigning for March local elections
Erdogan's office said the recordings were fake.
And external conditions are not supportive for Turkey either
as the Federal Reserve plans to reduce its monetary stimulus, in
the so-called tapering process.
"In Turkey you have the tapering worries but you also have a
layer of political risk on top. In a sense what's happening
today is a continuation of themes that have been running for a
while," said HSBC emerging equity strategy head John Lomax.
The lira fell 0.6 percent to 2.2096 per dollar while
local stocks fell more than 3 percent at one point.
Turkey's benchmark two-year government bond fell a
third of a percent in price, pushing yields to 10.95 percent.
CHINA, UKRAINE MOVES
China's yuan fell beyond the official midpoint rate for the
first time since September 2012.
The moves are linked to Beijing's plans to usher in more
reforms including lending curbs and a widening of the currency
band to 2 percent or more from 1 percent.
Such reforms may be announced at next week's National
People's Congress meeting.
"China is preparing to widen the daily trading band and they
are trying to prepare the market by increasing two way
volatility in the exchange rate," said Flemming Nielsen, analyst
at Danske Bank in Copenhagen.
"As we have seen, the two major drivers for emerging markets
have been Fed tapering and slower growth in China. It is
difficult to call the bottom for emerging markets as long as we
cant call a bottom in China."
The broader benchmark MSCI emerging index fell 0.1
percent, weighed down by China's CSI300 share index
which fell 2.6 percent.
The yuan was trading at 6.1247, much softer than the
midpoint which was set at 6.1184.
The hryvnia fell more than 3 percent to 9.4460 per dollar
, as focus turning to whether the country will get aid
from donors including the IMF.
A floating hryvnia was a key pre-condition the IMF sought to
renew its loan package to Ukraine last year.
Ukraine's sovereign dollar bonds maturing in 2014 and from
2017 all the way to 2023 all fell around 1 cent to the dollar,
having rallied up to 10 points on Monday.
Ukraine's stocks rallied 3 percent to a fresh 1-1/2
year high at one point but later slipped back, after soaring 15
percent on Monday. Ukraine is the best performer in MSCI
frontier equity index.
Forward currency markets are pricing in the hryvnia trading
at 10.47 in six months, a depreciation of nearly
10 percent from current levels.
In Russia, nervousness over Ukraine weighed on the rouble
"There's a correction of the strongly overbought Chinese
Yuan, plus uncertainty in the situation with Ukraine - these
factors negatively influence the rouble," said Denis Korshilov,
head of markets at Citibank Russia.
Elsewhere, Nigeria's naira rose 0.7 percent to 164.50 per
dollar while local stocks rose over 1 percent
, recovering from a sell-off following the
suspension of the central bank governor.
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )