By Sujata Rao
LONDON, Sept 4 (Reuters) - Central bank action lifted some
emerging market currencies off lows on Wednesday but higher U.S.
yields and the likelihood of military action against Syria kept
the sector under pressure.
Emerging stock markets were flat after Tuesday's
U.S. manufacturing data supported the view that the Federal
Reserve would start rolling back stimulus at its mid-September
That has boosted U.S. 10-year yields by almost
10 basis points since the start of the week and, as the IMF
stressed in a paper for this week's Group of 20 summit, holds
substantial risks for the developing economies who have profited
from the flood of dollars over the past year.
Limited U.S. strikes to punish Syrian President Bashar
al-Assad for his suspected use of chemical weapons against
civilians are also looking likely and a resulting oil price
spike would be an added headwind for energy importers such as
Turkey and India
"We are going to deal with geopolitical risk in the oil
price in the next few quarters - disruption in Iraq, Libya, the
story in Egypt," said Luis Costa, head of CEEMEA FX and debt
strategy at U.S. bank Citi.
"It's great news for the few oil exporters like Russia and
Nigeria, not fantastic news for the big energy importers, which
are also experiencing some depreciation pressures."
The Indian rupee staged a rebound however, rising 0.7
percent after suspected heavy dollar selling by the
central bank. That prevented it from hitting a new record low
after data showed India's services sector shrinking in August to
a four-year low
Dealers cited heavy intervention via state-run banks just
before new central bank governor Raghuram Rajan, a former IMF
chief economist, takes office.
Indonesia's central bank was also spotted providing dollar
liquidity to selected lenders, keeping the currency's losses to
around 0.4 percent, while the Turkish lira rose 0.13
percent as the central bank said it could provide dollars
out of its gross hard currency reserves if required.
The rouble gained 0.2 percent after Russia's central bank
head on Tuesday sent a warning about future inflation that
cooled some expectations of a cut in interest rates next week.
Derivatives markets point to more currency weakness ahead.
Rupee six-month forward priced the currency at 70.8 per dollar,
versus the spot price of 67.2. Rupiah six-month forwards
weakened almost 1 percent to 12,330 per dollar, versus the spot
rate of 11,100 .
On the Turkish lira, one-month risk reversals
show increased demands for dollar calls, or bets the greenback
will rise. Analysts say that is unsurprising, given interest
rates look unlikely to rise.
"They seem very, very reluctant to raise rates, even in a
situation with the lira going thru 2.4, 2.5 against the basket,"
Standard Bank analyst Tim Ash said.
"So the mix now is basically fixed or anchored policy rates,
and willingess to live with a weaker currency."
The rand got some respite, firming 0.3 percent to the dollar
after gold miners offered to moderate wage demands to
limit the duration of a strike which is estimated to cost South
Africa $35 million a day in lost output
On bond markets, South Korea was getting ready to launch a
10-year dollar bond for $1 billion which it hopes to price at
135 basis points above U.S. Treasuries. Kenya said it was in the
processs of appointing advisors to lead a bond issue of up to $2
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )