(Corrects in para 13 to say a sharp fall in Singapore's export
growth, not fall in exports)
* Emerging currencies plunge vs surging yen
* Emerging stocks down; Russia leads eastern Europe up
* Bahraini dinar, forwards fall as unrest deepens
By Sujata Rao
LONDON, March 17 (Reuters) - Emerging currencies including
the rand, won and real fell to around two-year lows against a
surging yen on Thursday, but currencies and stocks in eastern
Europe ticked slightly higher off recent multi-month lows.
Japan's unfolding nuclear crisis and deepening unrest in the
Gulf were keeping a tight lid on risk appetite. That kept
emerging stocks in the red -- they were down 0.6 percent to a
five-week low <.MSCIEF>, with year-to-date losses of 5.5
percent.
Most Asian markets closed in the red, with China, Taiwan and
India each losing more than 1 percent. India was also hit by an
interest rate rise and a hawkish tone from the central bank.
Expectations that Japanese investors will repatriate
overseas investments has boosted the yen and weighed on global
markets, especially on those emerging markets where Japanese
funds are heavily positioned.
The yen hit a record high to the dollar earlier on Thursday
and surged against most other currencies.
The South African rand fell to its lowest against the yen
<ZARJPY=R> since April 2009, Reuters data showed, while the
Brazilian real was at a 20-month low <BRLJPY=R>. Another popular
cross, the Korean won/yen <KRWJPY=R> also hit a two-year low.
"We are seeeing the yen strengthen a lot, a lot of stop
losses are getting triggered and that is exacerbating yen
strength, against the dollar and euro but also against emerging
currencies," said UBS emerging markets strategist Manik Narain.
"These are basically carry trades suffering on the back of
the yen move, it could potentially weigh more on these
currencies."
South Africa and Brazil are seen as the emerging markets
most at risk from any Japanese repatriation of cash as Japanese
retail investors are estimated to hold 1-2 percent of the local
bond market. The rand and real are also commonly used for
issuance of uridashi, overseas bonds aimed at Japanese buyers.
JPMorgan recommended investors cut their exposure to
emerging market currencies by 10 percent, forecasting global
uncertainties would boost flows into safe-haven assets. It said
Japanese investment in emerging debt amounted to around $20
billion of which Brazil accounted for a third.
"Commodity prices, equity markets and fixed-income markets
have reflected the increased uncertainty and the possibility of
a decline in the global growth trajectory. Emerging market
foreign exchange has not," the bank told clients, cutting a
range of emerging currencies in its model portfolio.
Japan's disaster has exacerbated concerns about global
economic growth, especially as recent euro zone and U.S. data
has been lacklustre, including U.S. housing and inflation data
on Wednesday.
In Asia, investors were disappointed by a sharp fall in
Singapore's export growth, which some analysts said could be
followed by an even steeper slowdown due to the Japan supply
chain shock.
"The market is getting concerned about the deterioraing
global growth inflation mix and that is a bad backdrop for
emerging currencies," UBS' Narain added.
Against a weaker dollar, the rand rose a quarter percent
<ZAR=D3>, edging away from three-week lows hit earlier this
week. The South African currency on Wednesday saw its biggest
one-day fall in a year and has lost over 2.5 percent this week.
RUSSIAN EQUITIES GAIN
Continued tensions in Bahrain fuelled fears of oil supply
disruptions, pushing up oil prices by $2 a barrel. That
boosted Russian stocks, which jumped 1.2 percent <>,
leading regional gains. They are up 8 percent this year.
Russian markets were led by state gas export monopoly
Gazprom <GAZP.MM> which extended gains to hit a 2-1/2-year high,
possibly as investors have dashed to invest in gas suppliers
after the Japanese nuclear crisis. Russia's top non-state gas
producer Novatek <NOTK.K> rose 1.2 percent.
Gazprom has risen more than 7 percent this week to post its
biggest weekly gains since early December.
The ThomsonReuters eastern European index <.TRXFLDEEPU> rose
1 percent, with Warsaw rising 0.6 percent <>.
The rouble eased a touch versus the dollar as well as
against its euro dollar basket but analysts expect the currency
to outperform peers due to higher oil revenues as well as
interest rate rises.
"Higher oil ... argues for a stronger rouble and we still
favour long rouble versus short CE-3 (zloty, forint, crown)
trades," BNP Paribas said in a note.
In the Gulf, the Bahraini dinar fell against its dollar peg
to the lowest since 2009, though analysts said the move was
prompted by very few trades. Investors also priced in a fall in
the dinar via the one-year dollar/dinar forward <BHD1Y=> market.
Bahraini five-year credit default swaps eased 4 bps to 350
bps.
On the bond market, sovereign emerging bond yields tightened
7 bps over U.S. Treasuries to 278 bps but the index shows the
yield premium has risen 15 bps since the end of last week.
(Editing by Susan Fenton)
