EMCurrencies Muted as U.S. Inflation Takes Centrestage


April 12 Reuters Currencies in emerging markets recovered from initial losses, but traded flat on Monday as focus turned to U.S. inflation data due later in the week, while investors pulled out of equities ahead of the corporate earnings season.

The MSCIs index of emerging market currencies was muted after falling as much as 0.2, with the U.S. dollar and Treasury yields retreating as investors awaited inflation data due on Tuesday.

Investors feared that a biggerthanexpected spike in inflation could spark another rally in the greenback.

But dollar bulls were also on the fence, given that any signs of a pullback in inflation could hurt hopes of early tapering by the Federal Reserve, and make the greenback less attractive.

Most EM currencies are trading lower this year amid growing bets on early policy tightening by the Fed, with inflation being one of the key factors to watch. Retail sales data is also due this week.

The lira traded flat after leading early losses across Europe, the Middle East and Africa EMEA. Data showed a higherthanexpected Turkish current account deficit in February, while the unemployment rate also rose.

Inflation expectations for the country have jumped in recent weeks on doubts over whether the central bank will keep policy tight, amid constant pressure from the government to reduce interest rates.

The lira has been trading consistently lower after the ouster of four central bank heads in two years cast doubts over its credibility.

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