LONDON: Nigeria's naira fell 1 percent to new record lows on Monday on fears of violence after a Feb. 14 election was delayed while a backup in U.S. yields issues pressured other emerging assets.
Turkey's lira hit new lows as worries about central bank independence persist while a stronger oil price and improved prospects for peace in Ukraine lifted Russia's rouble.
Friday's strong U.S. jobs report sent 10-year Treasury yields to one-month highs. Sentiment towards emerging markets was also hit by Chinese trade data showing a 20 percent fall in imports, a possible sign of deeper economic weaknesses.
While Chinese shares shrugged off the data to rise 1 percent , MSCI's emerging equity index fell 0.5 percent to one-week lows.
Ilan Solot, a strategist at Brown Brothers Harriman, said the Chinese data was a "warning flag".
But oil's rise to more than $57 a barrel was positive for Russia, he noted, while news that Russia, Ukraine, Germany and France will meet in Belarus on Wednesday to try to broker a peace deal for Ukraine was also positive for Russian assets.
Markit data showed Russian five-year credit default swaps down 11 basis points to 533 bps. The rouble rose 2.5 percent to the dollar, while stocks and local bonds touched one-month highs
.
"There's a (chance) a peace accord can be reached. Looks like there's a push from Europe. So it's a combination of higher oil prices and this possibility of an agreement being reached," Solot said.
But politics overshadowed oil prices in Nigeria as the electoral commission postponed presidential elections until March 28 due to security concerns. The decision has enraged the opposition which sees the move as caused by pressure from the PDP ruling party.
While the naira fell, Nigeria's 2023 dollar bond fell 0.6 cents and its yield spreads over Treasuries widened 5 basis points to 495 bps
"It is never encouraging when elections are postponed, even for a short period. In addition, it becomes less encouraging when the delay is announced with only a one-week notice," said Richard Segal, emerging markets analyst at Jefferies in London.
He saw the exchange rate stabilising closer to 205/210 per dollar, around the level non-deliverable forwards are quoting the naira at in a month's time.
Most emerging currencies weakened, with the Turkish lira down 0.8 percent to new record lows. The currency has been hit by repeated government calls for interest rate cuts which would erode Turkey's yield advantage over the dollar.
Solot said politics was the main driver for the lira too.
"There's increased hostility between the central bank and the government and the other issue is the appropriation of the bank last week," he said referring to the takeover of Bank Asya, a lender affiliated to opposition cleric Fethullah Gulen.
Fears that Greece's new government is on a collision course with its creditors hit emerging markets with close links to the euro zone, with the Polish zloty and Hungarian forint both falling 0.5 percent.
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