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  • Writer's pictureEllie Anderson

Last week in EM currencies

Turkish Lira

At the beginning of last week, the Turkish lira suffered losses after further shakeups in the

central bank. On Tuesday the currency fell by up to 2.7%, nearing 8.31 on the dollar in the

afternoon. This followed news that President Recep Tayyip Erdogan had replaced the

central bank’s deputy governor Murat Cetinkaya with Mustafa Duman, a former Morgan

Stanley executive previously unknown to many investors. However, this event was a minor

shock compared to the removal of the central bank governor Naci Agbal just 10 days prior,

causing the lira to weaken by up to 14%. Analysts were concerned that Agbal’s successor

Sahap Kavcioglu would revert to following Erdogan’s directions and cutting interest rates,

thus predicting the lira could slide considerably further. However, Thursday indicated a

brighter future as Kavcioglu talked about following his predecessor’s tighter monetary

policies, prompting gains on the lira by up to 1.7%.

Russian Rouble

Despite expectations that oil-linked currencies would see gains as OPEC+ met to discuss

increasing output, Thursday saw the rouble fall against the dollar to lows of around

USD-RUB 76.40. The day before had seen gains for the rouble on the success of OFZ bond

auctions by Russia’s Ministry of Finance. Sentiments changed on Thursday, however, as the

ongoing uncertainty about sanctions by the US continued. At the beginning of March, the US

and EU imposed sanctions on Russian officials for the poisoning and imprisonment of Alexei

Navalny, however, the US are still considering additional sanctions, potentially including

restrictions on imports of US goods, Russian financial assets and travel bans. The deadline

for deciding which sanctions to impose is June 2, therefore the uncertainty is likely to


At the start of the week, the rouble was moderately strengthening against the dollar, supposedly because of increasing oil prices. The rouble, however, is reported to follow oil

prices less closely than in the past. Following the OPEC+ meeting on Thursday, in which it

was decided that output would be increased gradually in an effort to roll back production

cuts, the price of Brent crude futures increased by 3.8% to around $65 per barrel.

Indian Rupee

So far this year the Indian rupee has been Asia’s best-performing currency, seeing gains of

1.3% in mid-March. Its success has been due to high levels of equity inflows, totalling $8

billion this year and a forecast current account surplus of 1.9% of GDP, alongside expected

economic recovery. However, on Tuesday the currency depreciated by 1.2% as state-banks

bought US dollars and US bond yields spiked. This week has also seen predictions that the

rupee will further depreciate through the rest of this year; a forecast from Standard Chartered says it will weaken by over 4% to USDINR76.5. It is suggested that the central bank will continue to intervene and that increased inflation and oil prices would likely have a negative impact on the currency.

Brazilian Real

Brazil’s real has been touted as the worst-performing currency of the year and in mid-March

was down nearly 8% on the dollar compared to the start of the year. The country has been

struggling considerably with the pandemic; the death doll reached over 66,000 in March

alone and only 7% of the population have been vaccinated against COVID-19. There has also

been significant political turmoil with calls for President Bolsonaro’s impeachment and the

return of former president Luiz Inacio Lula da Silva to Brazilian politics. The downward

pressure on the currency had been contributing to surges in inflation, reaching 5.2% in February. Calls for an increase in interest rates were answered in mid-March with a hike of

75 basis points to 2.75%, which provided the real with some support. However, the real fell

most recently on Thursday by 1.2% against the dollar to USDBRL5.69 as industrial production fell in February and there were reports that Bolsonaro could veto the recently approved 2021 fiscal budget to prevent the government’s spending cap from being exceeded.



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