LONDON: The Russian rouble skidded 0.7 percent against the dollar on Monday, tracking a further fall in oil prices and also pressured by a weak emerging markets backdrop that kept the benchmark equity index trading near two-month lows.
Bonds from Venezuela rose across the curve after an opposition election win in the oil-rich but crisis-hit country.
Failure by the oil producers' group OPEC to set an output limit at a meeting last week pushed oil prices close to levels last seen during the global 2008 crisis.
That is taking a toll on energy exporters while emerging markets as a whole are pressured by the high likelihood of a US rate rise next week as well as by the European Central Bank's failure to announce as much stimulus as expected.
MSCI's main emerging equity index fell 0.3 percent , extending a two-week long run of losses. Most emerging currencies slipped against the dollar, with the Chinese yuan hovering near a four-month low.
TD Securities strategist Cristian Maggio said emerging markets were suffering due to a "long tail of events". "First we had the disappointment from the ECB, which boosted the euro against the dollar, but then we had the US payrolls number on Friday, so the dollar strengthened again. So emerging market currencies are mostly falling against the dollar today," he said.
The rouble touched three-month lows versus the dollar while the South African rand fell 0.6 percent and its benchmark bond yields were at their highest since February 2014 after Standard & Poor's unexpectedly cut the outlook on its BBB- rating to negative.
That means the country could lose its investment grade rating within the next 12-18 months.
Fitch cut its rating by a notch to BBB-, the cusp of investment grade and junk.
"If South Africa is downgraded, it would be kicked out of some global bond indices, there will be an unwinding of positions, yields will go higher and the currency will depreciate as a result of capital outflows.
We will see a kneejerk reaction," Maggio added.
Oil prices weighed also on Gulf markets where Dubai's equity index fell 2 percent to one-year lows while Saudi stocks slipped 1 percent.
In dollar debt markets, Venezuela outperformed, its bonds rising between one and three cents across the curve after the opposition thrashed the ruling socialists in weekend parliamentary elections.
"It's better than we expected. Polls suggested a victory but whether that translated into seats was another question.
Also, (the government) seem to have accepted the result," Stuart Culverhouse, head of research at Exotix brokerage, said.
A two-thirds majority for the opposition would prompt further bond price gains, he added.
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