Russian assets cheer Moscow-Washington diplomacy

* Russian stocks jump 4.5%

* South African rand falls despite rate hike as dollar rallies

* Chile's peso rises after 150-bps rate hike

By Susan Mathew

Jan 27 (Reuters) - Russia's rouble jumped 2.2% on Thursday despite a rally in the dollar and stocks surged after the Kremlin left the door open for dialogue over the Ukraine crisis, while Chile's largest interest rate hike in 20 years lifted that country's currency.

The rouble RUB= outperformed an index of emerging market peers which was pressured by a stronger dollar and higher U.S. Treasury yields following hawkish U.S. Federal Reserve commentary that spurred bets of five or more rate hikes this year.

Strong U.S. economic growth data on Thursday lent weight to the speculations.

South Africa's rand ZAR= fell 0.1% despite an expected 25- basis-point hike from the country's central bank. The bank said monetary policy would remain accommodative for some time.

China's yuan CNY= dropped 0.8%, while Turkey's lira lost 0.3%

But a euro EUR= pressured by the dollar's surge saw central and eastern European currencies EURHUF= EURPLN= EURCZK= rally strongly, bolstered further by easing geopolitical worries about a potential Russian invasion of Ukraine.

Kremlin spokesman Dmitry Peskov said U.S. and NATO statements that Russia's main demands around post-Cold War security arrangements in Europe were unacceptable did not leave much room for optimism, but stopped short of closing the door on diplomacy.

Russia said a pullback in NATO military forces from Eastern Europe would help reduce military tensions in the region.

The rouble RUB= firmed to 77.5 a dollar, retracing losses that pushed it beyond 80 on Wednesday. Sovereign dollar bonds issued by Ukraine and Russia rose, and the cost of insuring exposure to Russia eased. Russia's main stocks index .IMOEX jumped 4.5%, on track for its best session since March 2020.

"We think Russian assets would not sell off as much this time around, unless the worst-case scenario materializes," said strategists at TD Securities.

"We believe that the (central bank) is aware of these risks and, while likely downplaying them in official communications, may adjust the trajectory of monetary tightening to preempt future moves," they said on Wednesday, adding they now expect a 100-basis-point hike from the central bank next month.

Latin American currencies also fared well, with Brazil's real BRBY surging 1.5%, while Mexico's peso MXN= firmed 0.2%.

Chile's peso CLP= rose 1% after the central bank hiked the key rate by 150 basis points to 5.5% overnight, more than the 125 basis points expected by markets.

The move was in line with most emerging market central banks as they try to rein in stubbornly high inflation.

Moody's on Thursday said the newly elected administration's rejection of additional pensions withdrawals is credit positive.

Key Latin American stock indexes and currencies at 1412 GMT: Stock


Daily % change indexes

MSCI Emerging Markets








Brazil Bovespa


112769.51 1.33 Mexico IPC



0 Chile IPSA



0.28 Argentina MerVal



0 Colombia COLCAP


-0.34 .COLCAP



Daily % change Brazil real



1.52 Mexico peso



0.15 Chile peso



0.54 Colombia peso




Peru sol



-0.27 Argentina peso (interbank)

104.7500 -0.04


Reporting by Susan Mathew in Bengaluru; editing by Jonathan Oatis

Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.

All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.

Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.

We are using cookies to give you the best experience on our website. Read more or change your cookie settings.

Risk Warning: Your capital is at risk. Leveraged products may not be suitable for everyone. Please consider our Risk Disclosure.