Currencies, stocks buoyant ahead of Russia-Ukraine talks

Reuters: Emerging market assets clawed higher on Thursday, as investors found comfort in planned diplomatic talks between Russia and Ukraine, while an overnight slide in oil prices calmed some nerves about global inflationary pressures.

Asian markets led the gains, with bourses in Taiwan and China rising more than 2% each, while the MSCI’s EM stocks index added 1.6% by 0901 GMT.

The Russian rouble strengthened more than 8% to 120.47 to a dollar in offshore trading, while also steadying in Moscow. The currency has erased about 50% of its value in Moscow trading since Russia invaded Ukraine on Feb. 24, despite measures taken by the Russian central bank.

A host of Western sanctions slapped on Russia, most recently a U.S. ban on oil imports has set off a rally in crude prices, which even though were firm on Thursday, suffered heavy losses overnight.

Russia’s foreign minister Sergei Lavrov and his Ukrainian counterpart Dmytro Kuleba were set to begin planned talks on Thursday, in what will be the first meeting between the two since Russia invaded Ukraine two weeks ago.

“Markets seemed to see a glimmer of hope for a dtente on all fronts,” said Antje Praefcke, FX and EM analyst at Commerzbank, pointing to the overnight decline in oil prices assuaging fears of stagflation and real diplomatic negotiations between Russia and Ukraine.

“Following three weeks of warfare and huge uncertainty the market is, of course, very happy to accept this glimmer of hope: as a result, the safe havens are less in demand, the stock markets are recording strong gains in parts.” Risk appetite gained momentum on Thursday and pressured bullion, hurting commodity-rich South Africa’s rand. The currency weakened 0.6%, also hit by angst over state-owned utility Eskom’s move to double-planned power outages this week.

The Turkish lira slid 0.7% to lows not seen since a currency crisis in December on worries of a fallout from Russia’s war on Ukraine on its already rocketing inflation and widening current account deficit.

Separately, China’s foreign exchange trading platform said it will widen the daily floating range for yuan/rouble trades in the interbank market to 10% from 5% from Friday.

Investors also awaited key U.S. inflation data and the European Central Bank’s policy decision later in the day.