LONDON: The Nigerian naira plumbed new record lows on Wednesday on weaker oil prices and fears of election-linked turmoil, while most other emerging currencies also retreated on expectations of monetary easing.
Broader emerging markets were range-bound with a weaker bias before a meeting of the U.S. Federal Reserve which many expect to signal a delay in monetary tightening amid signs that a stronger dollar is hurting U.S. corporate profits.
The greenback firmed on Wednesday, pressuring emerging currencies which are also being undermined by policy easing expectations at home. Singapore's unexpected rate cut pushed its dollar to 4-1/2 year lows and fanned losses across Asian currencies.
"We are now in a bull secular trend for the dollar ... which means all (emerging) currencies suffer," TD Securities strategist Cristian Maggio said.
Dollar strength is also pushing down oil prices, in turn hitting assets of oil exporters.
The naira recovered off opening record lows, Thomson Reuters data showed, but the currency, down 5 percent this year alone, faces more headwinds from a Feb. 14 election that is threatened by a militant Islamist insurgency in the north.
The central bank has resorted to tightening liquidity and has ruled out floating the currency, but analysts are sceptical.
"A managed exchange rate regime appears unsustainable in a context of low oil prices and, consequently, falling hard currency reserves," Ecobank told clients, predicting the bank might have to raise rates or again devalue the naira.
Nigeria and oil price falls have hit London-listed oil producer Afren, which has entered talks with bondholders and is considering a delay to a $15 million bond coupon due Feb 1. Its shares bounced 36 percent after Tuesday's 72 percent drop but its 2016 bond is trading at just 40 cents in the dollar.
Fitch cut Afren's rating to 'C', saying default was "imminent". Bondholders' losses may be higher than originally estimated given the oil price environment, Fitch added.
Russian markets also remained under stress as the United States vowed to keep up pressure via fresh sanctions that block access to investment and fundraising. The rouble firmed 0.3 percent, however, staying off lows hit on Monday when Standard & Poor's cut Russia's rating to junk.
In central Europe, rate cut expectations are building, with Hungary sending dovish signals on Tuesday. Polish 10-year bond yields briefly fell under 2 percent on Tuesday but were later flat on indications of relatively strong economic growth.
Emerging equities were flat, just off seven-week highs hit last week. Emerging European stocks were led lower by Athens, which lost 4.3 percent. Some Greek shares fell more than 10 percent after the new left-wing government pledged to freeze privatisations.
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