* Ukranine's hryvnia down 4 percent vs dollar on day
* Russian rouble at five-year dollar low
By Sujata Rao
LONDON, Feb 26 Ukraine's hryvnia tumbled 4
percent on Wednesday to 10 per dollar on Wednesday as political
uncertainty mounted, its weakness spilling into the Russian
rouble, taking that currency to a fresh five-year dollar low.
Broader emerging assets however traded broadly in positive
territory on the back of a smaller fall in the Chinese yuan than
Ukraine remains without a settled government several days
after the ouster of President Viktor Yanukovich, raising
concerns that the country will fail to tap outside financial
support in time to repay debts as its own hard currency reserves
The hryvnia's latest fall takes year-to-date losses on the
once tightly controlled unit to almost 20 percent against the
dollar, more than any other major emerging currency in 2014.
Bonds are also falling, with the 2017 dollar issue
now having erased over half its Monday gains.
"The whole political picture in Ukraine has become even more
blurred than before," said Simon Quijano-Evans, head of emerging
markets research at Commerzbank in London.
"As long as there is no clear resolution on who is in charge
and as long as there is no unity among global policymakers on
resolving the issues, it is impossible to say what happens to
asset prices," he added.
Reflecting the fears, debt insurance costs for Ukraine
jumped 76 basis points on the 5-year credit default swaps
market, Markit said.
The moves are also weighing on the neighbouring rouble which
fell half a percent to the dollar and to a record low versus the
euro . Russia holds $3 billion worth of
Ukrainian eurobonds issued last December which could end up in
default if certain bond covenants are breached.
"These Ukraine concerns (are weighing) on the rouble in the
first place," said Maxim Korovin, fixed income analyst at VTB
Capital in Moscow, adding investors may be betting against the
rouble as a way to reduce exposure to the region and so
indirectly hedge their Ukraine risk.
"If you short the rouble and the rouble is weakening that
will offset your loss," he said.
The rouble is at a record low against the euro.
Elsewhere, investor focus remained on the Chinese yuan which
has fallen more than 1.5 percent since mid-January, weakening
below the central bank's official daily fixing for a second day
in a row.
Late in the session, it clawed back some of the declines.
Asian currencies gained after the yuan's smaller fall, led
by the Korean won while MSCI's emerging equity index rose
0.4 percent after two days of losses as Chinese shares also
snapped a four-day losing streak .
"Any fears that the (U.S. Federal Reserve) is going to
tighten aggressively has been replaced by what's happening in
China," said Neil Shearing, head of emerging markets research at
Capital Economics in London.
While some view the Chinese moves as a tacit monetary policy
loosening, others reckon they are aimed at preparing the market
for more reform and also at stamping out speculative foreign
positions in the currency.
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )