EMERGING MARKETS-Trade, vaccine optimism buoy stocks, FX; Belarusian rouble drops

* South African rand at highest in nearly one month

* Rouble up with eyes on Belarus, Germany

* MSCI EM stocks index scales over six-month peak

* Lira down despite consumer confidence showing optimism

* Belarus won’t use capital controls, central bank says

By Susan Mathew

Aug 25 (Reuters) – South Africa’s rand hit its highest in nearly a month on Tuesday and Russia’s rouble gained as risk appetite got a boost from signs of progress in U.S.-China trade talks and optimism around a coronavirus vaccine.

Top U.S. and Chinese trade officials reaffirmed a commitment to Phase 1 of their trade deal, despite deteriorating relations between the two countries. That weakened demand for safe-haven assets such as gold and the dollar.

Commodities exporter South Africa’s rand extended gains against the dollar to a sixth straight session, up 0.6%, while Russia’s rouble rose 0.3% despite falling oil prices.

Eyes were also on Moscow’s ties with Berlin after German Chancellor Angela Merkel told Russia to investigate the suspected poisoning of Russian opposition figure Alexei Navalny.

MSCI’s index of emerging-market shares, meanwhile, scaled over six-month highs, with Asian shares ex-Japan hitting highs not seen since January. Germany’s gross domestic product declined less than expected, further fuelling the rally.

The moves followed records for the S&P 500 and the Nasdaq overnight on COVID-19 treatment optimism. The U.S. government was also considering fast-tracking AstraZeneca’s experimental vaccine for the virus, the Financial Times reported.

But analysts warned against exuberance as market volatility remained high amid economic uncertainty.

“Markets are opportunistically buoyed in spite of underlying and lingering risks; which is inherently a less stable state susceptible to a shakedown,” said analysts at Mizuho Bank in a note.


In Belarus, massive protests demanding the removal of President Alexander Lukashenko continued.

The Belarusian rouble fell to record lows against the euro and extended losses for a fifth straight session against the dollar. Reuters exclusively reported that the Belarus central bank will not introduce capital controls to prevent the currency’s depreciation.

Banks were running out of foreign currency as residents sold the Belarusian rouble, sources told Reuters. But a board member at the central bank said the issue did not signal liquidity problems.

The Polish zloty gained 0.3% after Finance Minister Tadeusz Koscinski said Poland’s state budget deficit may fall to 33%-50% in 2021.

Hungary’s forint was at a one-month low before a central bank meeting later in the day that’s expected to leave interest rates unchanged.

Turkey’s lira slipped despite data showing manufacturing confidence rose to 106.2 points in August.

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