Signs of progress in US-China trade talks lifted emerging stocks on Monday and propelled an index of developing world currencies to an 80-day high, while Turkey's lira weakened as all eyes remained on Ankara's latest military movements in Syria. Over the weekend, Chinese Vice Premier Liu He said Beijing will work with Washington to address each other's concerns, and that stopping the trade war would be good for both sides and the world.
That helped investors look past some dismal data out of Asia such as trade numbers from South Korea and Thailand, taking MSCI's index of EM shares up 0.3% to resume its winning streak for an eighth session in nine, while its currency counterpart firmed 0.4% by 0823 GMT. "(His comments) are excellent for global risk sentiment as it's more confirmation that Phase One (of a US-China trade deal) is likely a done deal," said Stephen Innes, Asia Pacific market strategist at AxiTrader.
The two countries had reached a partial trade agreement reached earlier this month, which suspended US tariffs on Chinese goods that were to take effect last week. The South Korean won led gains among Asian currencies as the data spurred bets for more stimulus, while the rally in stock markets across Asia spilled over into European hours, with Russian stocks up 0.3%, while those in South Africa gained 0.5%.
Supporting China's yuan was the central bank's unexpected decision to keep its new benchmark lending rate on hold, suggesting Beijing is keen to avoid over loose monetary policy for fear of fuelling the build up of debt even more. Turkey's lira struggled, weakening 0.6% as Ankara pushed to establish a safe zone in northern Syria.
Kurdish-led forces said they withdrew from the key border town of Ras al Ain during a ceasefire period. Washington signalled it could revoke sanctions if the pause were to become permanent. "With the truce scheduled to end on Tuesday night, TRY's traders will be on the edge," wrote Rabobank FX strategists Piotr Matys and Jane Foley.
As the threat of sanctions still loom, it may be prudent for Turkey's central bank to refrain from lowering interest rates further at its meeting on Thursday to offer the lira at least some support should fighting in northern Syria resume, they said. US sanction against Turkey's offensive into Syria and the threat of more have seen the currency give up around 3% so far this month.
South Africa's rand rose 0.2%. President Cyril Ramaphosa said he would soon announce a permanent chief executive for state-run embattled utility Eskom. Eskom's nationwide blackouts last week had pressured the currency and stocks, but the rand had firmed on Friday after the government released a long-delayed plan for electricity generation to address crippling power cuts.
Investors in central and eastern European markets watched Brexit developments after British lawmakers delayed a crucial vote on a Brexit deal agreed upon by the United Kingdom and European Union last week, forcing PM Boris Johnson to seek an extension beyond the Oct. 31 deadline.
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