Turkish lira rises from record lows, EM equities set for monthly decline

Turkey's lira recovered from record lows on Wednesday as the government lowered a tax on foreign currency transactions, while emerging-market equities were set for their first monthly decline since the coronavirus-driven crash in March.

The lira was at 7.73 against the dollar after slumping to a low of 7.86 in the previous session amid fears Turkey would get dragged into a conflict between Armenia and Azerbaijan over the enclave of Nagorno-Karabakh.

Investors were also assessing a new economic programme laid out by Finance Minister Berat Albayrak on Tuesday that called for a 0.3pc rise in output in 2020 despite the pandemic. Analysts doubted some of the forecasts were achievable.

"It is difficult to be confident about the attainability of the government's end-2021 inflation forecast," said Berna Bayazitoglu, a Credit Suisse analyst.

Some of Albayrak's responses "exacerbate local depositors' and non-resident investors' already-cautious views on the lira," Bayazitoglu said.

An index of emerging-market currencies rose 0.1pc but was on course to end September with its smallest monthly gains in four, as a strengthening dollar and surging coronavirus cases kept risk appetite subdued.

"The latter development, in particular, means that our year-end forecasts for EUR-PLN and EUR-HUF are subject to significant upside risk," FX analysts at Commerzbank said.

The Polish zloty and the Hungarian forint were up against the euro on Wednesday but were set for monthly declines of more than 2pc each.

Russia's rouble rose 0.8pc after slumping to a six-month low against the dollar in the previous session on growing geopolitical concerns as well as a surge in domestic COVID-19 infections.

The rouble could get support from state-run companies that have been told to revise their limit of net foreign exchange assets, which should encourage them to buy roubles, Interfax news agency reported late on Tuesday.

The South African rand rose 0.3pc after sliding as much as half a percent in early trading.

Data showed headline consumer price inflation slowed to 3.1pc year-on-year.

A basket of developing-world equities rose 0.4pc, driven by gains in Hong Kong, South Korea, Taiwan and Turkey.

Still, the index was set to snap a five-month winning streak as global economic data signalled a choppy recovery from the health crisis.