Sunday, January 16

More trouble ahead for erratic emerging market currencies

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The increase in forward volatility in the rouble and lira is more pronounced for key events and dates that occur later in the election process, Barclays wrote in a note to clients.

“The move is consistent with a lower likelihood of a contested and delayed result, but resulting in outsized moves in the rouble and lira as the race, according to prediction markets, has moved in favor of Biden in recent days.”

Turkey’s lira slumped to a record low last month and Russia’s rouble returned to levels last seen in March on fears the countries would get dragged into military conflict in the South Caucasus.

The lira, which has plunged nearly 30% this year, is set to depreciate 3.2% more to 8.0 per dollar in the next 12 months, the poll showed.

But the Russian rouble, which has lost over 25% of its value against the dollar this year will gain over 9.0% to 71.0 per dollar by this time next year.

“Apprehensions around potential new international sanctions and the uncertainties related to the US elections may keep the rouble on the defensive with higher volatility likely until the end of the year,” said Lee Hardman, currency analyst at MUFG.

(For other stories from the October Reuters foreign exchange poll:) (Reporting by Vivek Mishra in BENGALURU, Vuyani Ndaba in JOHANNESBURG; Polling by Shaloo Shrivastava, Manjul Paul, Indradip Ghosh and Mumal Rathore; Editing by Ross Finley and Alison Williams)