LONDON, Feb 21 (Reuters) - Emerging stocks firmed on
Thursday, tracking global equity markets which were boosted by
solid earnings and speculation for further U.S. interest rate
cuts after the Federal Reserve cut its growth forecast for 2008.
In the minutes from its latest policy meeting published in
the previous session, the Fed revealed it had cut its economic
growth forecast for this year due to the deepening housing
slump, soothing inflation concerns heightened by soaring
commodity and energy prices.
Emerging stocks <.MSCIEF> gained 1.2 percent.
"Equity markets have done pretty well on the back of the
minutes and generally that's good for emerging currencies," said
Henrik Gullberg, foreign exchange strategist at Calyon.
Although South African shares followed the global upward
trend, the rand <ZAR=> remained under pressure from the
country's continuing problems with power shortages and as the
market digested Wednesday's budget.
South Africa's power utility Eskom [] is struggling
to meet demand for energy in Africa's biggest economy, resulting
in costly outages to shield the grid.
The company said on Thursday it was in talks with various
companies in connection with buying back power and also said it
had secured 34 million tonnes of coal from other South African
companies. []
But one of the main drags on the currency was the
introduction in the budget of a rise in foreign exposure limits
for institutional investors.
"Although an initial outflow is expected, in the long term,
this should help narrow the deficit on the income account of
South Africa's current account balance. For now, however, that
is of little consolation, with markets clearly focused
on near term risks," Standard Chartered said in a research note.
"Despite delivery of a positive budget overall, the rand has
yet to benefit," the note said.
POLISH OUTLOOK
Standard & Poor's said it had revised its outlook on
Poland's foreign currency rating to positive, as the new
government created a better environment for fiscal and
structural reform. The Polish zloty rose 0.2 percent against the
euro <EURPLN=> on the news.
The Czech crown <EURCZK=> hovered near record highs against
the euro, after a Czech central bank board member said it would
have to tighten monetary policy if excessive wage growth demands
threatened to boost inflation. []
"Fundamentals are definitely supportive for the Czech crown.
There is potential for further rate hikes in the Czech Republic,
while we believe the ECB will have to cut rates in the second
half," Henrik Gullberg said.
Ukraine's hryvnia <UAH=> was slightly weaker after the
Ukrainian central bank dispelled speculation in the previous
session that a revaluation of the currency to combat inflation
was imminent. The currency had earlier reached the top end of
its usual corridor of 5.0 to 5.06 per dollar.
"We expect political dynamics to outweigh the economic ones
to ensure a stable hryvnia in the near term, or at least until
there is wider macro policy coherence," Citi said in a research
note.
Ukraine's president Viktor Yushchenko launched a bid on
Wednesday to alter the constitution to end a stand-off with
parliament and the government over the distribution of power,
which he said had deepened instability.
The Ukraine portion of the JP Morgan EMBI+ index tightened
by 5 basis points.
Overall, spreads on the JP Morgan EMBI+ index <11EMJ>
remained unchanged at 269 basis points over U.S. Treasuries.
The Pakistani rupee <PKR=> was steady after rising 2 percent
to a one-year high in the previous session and Pakistani stocks
<> hit record highs following the weekend's peaceful
election in which fears of pre-poll rigging were proven false as
opposition parties headed for victory.
(Reporting by Raissa Kasolowsky, editing by David
Christian-Edwards)
