Russia's rouble firms on higher oil prices; Turkish lira slips

Russia's rouble firmed on Friday as major oil producers agreed to continue some production cuts, while the Turkish lira eased after U.S. lawmakers moved closer to sanctions over Turkey's purchase of Russian S-400 missile defence systems.

The rouble rose about 0.3pc to hover at three-month highs against the dollar, also supported by hopes that a working COVID-19 vaccine would speed up a global economic recovery next year.

"Risk assets have enough going for them for the time being," said Han Tan, an analyst at FXTM.

"Besides positive vaccine developments that promise to aid the global economic recovery, major central banks are not shying away from rolling out more monetary policy support for their respective economies."

A broader basket of emerging market currencies firmed 0.4pc to its highest level in more than two years, supported mainly by Asian currencies.

South Africa's high-yielding rand eased slightly against the dollar, but was still set for its fifth straight week of gains as bets on a global rebound sparked demand for risky assets in the developing world.

Emerging market inflows have now turned positive for the year, with Morgan Stanley analysts saying another $2.79 billion had come into EM debt funds over the last week.

The Turkish lira looked set to end the week on a glum note, easing 0.2pc after U.S. lawmakers included mandatory Turkish sanctions in a defence spending bill that moves Washington a step closer to punishing its NATO ally for buying Russia's S-400 system last year.

The lira has hit a series of record lows this year and finally stabilised last month after a sharp policy rate hike following a shake-up in Turkey's economic leadership.

All eyes are now on the next central bank meeting on Dec. 24 for signs of any further increase in rates again, particularly after data on Thursday showed a bigger-than-expected jump in inflation.

"Once again, we have arrived at the familiar juncture where we cannot be sure how decisive (the central bank) will be and how long President Tayyip Erdogan will have patience with high interest rates," said Commerzbank analyst Tatha Ghose.

"Concerns of this very nature feed back to lira weakness, which in turn drives inflation further up."

MSCI's index of emerging market stocks jumped 0.9pc, and was only 7pc off an all-time high hit before the financial crisis in 2007, with Russian equities leading gains.