Turkish lira firms as c.bank holds rates; Russian bonds fall



* Turkey cenbank keeps rates unchanged at 14%

* Russian, Ukraine dollar bonds slide (Updates after Turkey central bank decision)

By Susan Mathew

Jan 20 (Reuters) - Turkey's lira firmed more than 1% after the central bank left the policy rate unchanged on Thursday, while Russian and Ukraine bonds dropped as concerns about a possible military conflict between the two nations resurfaced.

The lira TRY= , which was trading flat-to-lower before the decision, briefly jumped 1.3% to 13.14 a dollar from 13.41. It was last trading at 13.29.

Turkey's central bank left the key rate unchanged at 14% and said it would prioritize the lira. It expected a disinflation process to start on the back of recent measures taken to stabilize the currency.

"The unchanged repo rate marks the beginning of less aggressive policy monetary policy," said Ima Sammani, FX market analyst at Monex Europe.

"The addition of the phrase around prioritising the Turkish lira suggests to markets the central bank is finally admitting to having an FX target, which is welcomed in Turkish assets."

The lira sank 44% in 2021 after 500 basis points worth of interest rate cuts amid surging inflation sent the currency spiralling to record lows of over 18 per dollar.

The central bank was pressured into cuts as President Tayyip Erdogan sought stimulus to spur economic growth.

On Thursday, Turkish stocks .XU100 rose 0.6%, with the banks index .XBANK climbing 1.1% to hit one-month highs.

Russia's dollar-denominated government bonds fell as much as 1.5 cents and Ukraine bonds dropped nearly 1 cent after U.S. President Joe Biden said Russia will make a move into Ukraine.

Russia's rouble RUB= slipped 0.6% after surging 1.2% on Wednesday, while Ukraine's hryvnia UAH= gave up session gains to trade 0.1% lower. Ukraine's central bank is seen hiking the key rate by 50 bps later in the day.

Biden and his team have prepared a broad set of sanctions and other economic penalties to impose on Russia in the event of an invasion. European Commission president Ursula von der Leyen said the EU will respond with "massive" economic and financial sanctions.

Among stocks, while more monetary policy easing in China lifted blue-chips in the mainland .CSI300 and Hong Kong shares .HIS , persistent worries about a hawkish Federal Reserve hit most other bourses across emerging markets.

MSCI's China-heavy index of EM shares .MSCIEF rose 1% after losing 2% over the last five sessions.

For GRAPHIC on emerging market FX performance in 2021, see Link For GRAPHIC on MSCI emerging index performance in 2021, see Link

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see



Turkey CDS vs S.Africa, Brazil Link



Reporting by Susan Mathew in Bengaluru; Editing by Rashmi Aich
and Ramakrishnan M.

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