LONDON, July 6 (Reuters) - Emerging currencies stayed on the back foot on Thursday after the previous day's slides, with South Africa's rand holding near seven-week lows due to a scare caused by proposals to nationalise the central bank and expropriate land.
Inconclusive U.S. Federal Reserve minutes kept the dollar near one-week highs and while some policymakers said weak inflation made them uncomfortable with the implied path of rate rises, expectations are that the Fed is moving steadily towards unwinding its balance sheet.
Emerging currencies and equities took little solace from oil's 1 percent bounce with the rouble tumbling 0.7 percent against the dollar to the lowest level since January and MSCI's benchmark emerging equity index flat after a lacklustre session in Asia.
JPMorgan data showed an emerging currency index, the ELMI Plus, closing at a six-week low on Wednesday.
The rand fell 0.4 percent, extending the 1.6 percent slide driven by proposals at the conference of the ruling ANC to nationalise the respected central bank and expropriate land without compensation but also by the party's failure to agree any much-needed reforms.
The central bank calmed some nerves by stressing its independence was enshrined by the constitution regardless of ownership. But Commerzbank said the rand faced "uncertain times" reminding clients of proposals last month to change the central bank's mandate to include growth.
"The announcement does leave a bad taste. Even well before the parliamentary elections in 2019 this is likely to cause further concerns about the central bank's independence and its stability-orientated course," Commerzbank said.
Benchmark bond yields were near 2-1/2-month highs but the commodity-heavy bourse rose to one-month highs.
The Turkish lira, the emerging currency most vulnerable to higher U.S. interest rates, touched six-week lows, losing half a percent against the dollar.
Earlier in the day, most Asian currencies also weakened, led by the Korean won's 0.3 percent fall and the Philippine peso touching 11-year lows
Morgan Stanley said however that while Western central banks' stimulus unwind presented some risks to emerging markets, the latest moves were likely down to "position squaring" amid recovering growth and reasonable asset price valuations.
"We think this period of EM weakness will prove temporary and maintain a bullish medium-term view," the bank added.
Middle Eastern assets were steady after four Arab states decided not to immediately slap fresh sanctions on Qatar. Qatari stocks fell 0.6 percent but the riyal was flat in the spot as well as forward markets.
Emerging sovereign bond spreads over Treasuries narrowed one basis point but were at the highest in two weeks.
For GRAPHIC on emerging market FX performance 2017, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see http://tmsnrt.rs/2dZbdP5
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see) Emerging Markets Prices from Reuters
Equities Latest Net Chg % Chg % Chg
Emrg Mkt Indx 1010.11 +0.26 +0.03 +17.15 Czech Rep 986.78 +5.51 +0.56 +7.07 Poland 2321.21 +13.72 +0.59 +19.16 Hungary 35543.33 +245.19 +0.69 +11.06 Romania 8174.23 +31.83 +0.39 +15.37 Greece 841.38 +0.04 +0.00 +30.72 Russia 1006.47 -1.41 -0.14 -12.66 South Africa 46366.23 +124.79 +0.27 +5.61 Turkey 00772.13 +27.68 +0.03 +28.97 China 3212.51 +5.38 +0.17 +3.51 India 31401.25 +155.69 +0.50 +17.93 Currencies Latest Prev Local Local close currency currency
% change % change
Czech Rep 26.10 26.09 -0.04 +3.47
Poland 4.23 4.23 -0.12 +4.04
Hungary 308.56 308.64 +0.03 +0.08
Romania 4.59 4.59 +0.05 -1.09
Serbia 120.31 120.31 +0.00 +2.53
Russia 60.19 59.97 -0.37 +1.78
Kazakhstan 324.56 324.56 +0.00 +2.80
Ukraine 26.05 26.11 +0.21 +3.65
South Africa 13.37 13.37 +0.04 +2.72
Kenya 103.75 103.60 -0.14 -1.33
Israel 3.51 3.51 -0.09 +9.70
Turkey 3.62 3.61 -0.45 -2.62
China 6.80 6.80 -0.06 +2.04
India 64.72 64.80 +0.12 +4.99
Brazil 3.29 3.29 +0.00 -1.07
Mexico 18.25 18.30 +0.26 +13.51
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 330 0 .02 7 82.32 1
All data taken from Reuters at 08:07 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT. (Editing by Toby Chopra)