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By Anisha Sircar

May 12 (Reuters) – Emerging market currencies slipped on Thursday as the greenback hit its highest level in two decades after hotter U.S. inflation data, while regional shares tumbled to fresh 22-month lows on pressure from stock markets in India and China.

MSCI’s index of emerging market (EM) currencies .MIEM00000CUS resumed a descent that began in early-April, falling 0.6% to return to its weakest level since November 2020 after a breather in its last two sessions.

Inflation pressures in parts of EM are rising, even though U.S. inflation might have peaked, said Natalia Gurushina, EM Fixed Income economist at VanEck.

Data on Wednesday showed U.S. consumer price growth is likely to stay hot for a while. Higher-than-expected inflation lifted the dollar =USD and dragged stocks as it suggests a more robust Federal Reserve response this year. nL2N2X315F

“Some EM central banks will have to keep on hiking – in a sense ‘matching’ the Fed’s hikes – even though EM inflation is driven by exogenous factors, but the problem is that global supply shocks are feeding into core inflation, and this passthrough might be higher than in normal pre-COVID years,” Gurushina added.

Stocks .MSCIEF plunged 2.3% to a 22-month low, dropping eight out of its nine previous sessions.

Indian shares .NSEI, .BSESN dropped nearly 2% and the rupee INR=IN hit an all-time low for a second time this week ahead of domestic retail inflation numbers, with a Reuters poll expecting it to surge to an 18-month high. nL3N2X40XW nL3N2WY21A

China stocks .SSEC, .CSI300 pared gains to close upto 0.4% lower, while the yuan CNY= slipped 0.9% to a 20-month low.

The South African rand ZAR= fell 0.8%, ahead of mining data and after new COVID-19 cases crossed 10,000 for first time since January, stoking fears of a fifth wave. nJ8N2WE008

In Central Europe, the Czech crown EURCZK= bounced 0.2% a day after plumbing two-month lows after Czech Republic President Milos Zeman appointed Ales Michl, a central bank board member who has opposed policy tightening, as the bank’s new governor, signalling a likely end to rate hikes. CEE/

For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets nTOPEMRG

For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

(Reporting by Anisha Sircar and Lisa Pauline Mattackal in Bengaluru; editing by Uttaresh.V)

((Anisha.Sircar@thomsonreuters.com; Twitter: https://twitter.com/AnishaSircar;))

Adds details on rules and separate comment on the baht

BANGKOK, May 12 (Reuters) – Thailand’s central bank said on Thursday it plans to further relax foreign exchange rules, seeking to help companies more efficiently hedge and manage risks.

The measures would come into effect on Friday and “make overseas transactions easier while simplifying hedging for businesses so there can be more efficient risk management,” ​Assistant Governor Alisara Mahasandana told a virtual briefing.

More measures will come into effect over the next few years, she added.

“We will focus on non-banks by expanding the scope of non-bank FX services and adjusting guidelines for more flexible FX transactions,” she said, noting this would help lower costs.

She said on average such transactions account for 7% of expenses, which is higher than the average in the region.

Separately, Thailand’s central bank said the movement of the baht THB=TH has had limited impact on inflation and the economy, after the currency reached its weakest level for five years against the dollar on Thursday. nL2N2X405R

“The Bank of Thailand is closely monitoring the situation and is ready to take care of the baht if necessary,” Alisara Mahasandana said. nL3N2X4155

(Reporting by Kitiphong Thaichareon and Satawasin Staporncharnchai, and Chayut Setboonsarng; Editing by Martin Petty and Ed Davies)

((chayut.setboonsarng@tr.com, Twitter: @ChayutSet; +66854849033;))

May 12 (Reuters) – Euro zone bond yields fell sharply on Thursday after U.S. inflation data reinforced investors’ concerns over the outlook for growth given the prospects for aggressive Federal Reserve rate hikes.

The U.S. consumer price data, released on Wednesday, showed inflation slowed in April but was still higher than expected, while a narrower reading stripping out volatile food and energy prices rose sharply. nL2N2X315F

That eventually pushed stock markets and bond yields sharply lower, with much of the move coming after the European close, as the focus turned back to the economic toll that aggressive Fed rate hikes could have. nL2N2X32ZQ nL2N2X32KF

On Thursday, that weak sentiment was mirrored in Europe. European stock futures were down over 2%, pointing to a weak open. STXEc1

Bond yields fell sharply led by the longer-end of the yield curve and Germany’s 10-year yield, the benchmark for the bloc, fell as much as 12 bps to 0.875%, its lowest in nearly two weeks. DE10YT=RR

“I think a lot of it is catch up from what happened yesterday, and also there’s still a lot of negative sentiment in the U.S. Treasury curve,” said Lyn Graham-Taylor, senior rates strategist at Rabobank.

The two-year yield, sensitive to interest rate expectations, fell as much as 8 bps to 0.064%, the lowest in three weeks. DE2YT=RR

“The market is able to trade a combination of: the Fed’s very determined to act in the face of high spot inflation, but at the same time, the chances of it achieving a soft landing are pretty minimum, and generally economic growth prospects are getting worse,” Graham-Taylor said.

Money markets meanwhile have trimmed their bets on ECB rate hikes, now pricing in 84 bps of hikes by year-end, compared to 95 bps at the start of the week. ECBWATCH

That has been supportive of Italian debt, a key beneficiary of ECB stimulus, with the closely-watched risk premium over German bonds falling to around 190 bps after rising over 200 bps recently, which was the highest since May 2020.

Its 10-year yield is at 2.80%, down from over 3% last week and was down 9 bps on Thursday. IT10YT=RR, DE10IT10=RR

Italy will raise up to 6.75 billion euros from an auction of three, seven and 30-year bonds. nS8N2V704S

In another auction, Ireland will also raise up to 1.25 billion euros from 10- and 23-year debt. nS8N2R504T

(Reporting by Yoruk Bahceli; Editing by Simon Cameron-Moore)

((Yoruk.Bahceli@thomsonreuters.com; +44 20 7542 7571; Reuters Messaging: yoruk.bahceli@thomsonreuters.com))

May 12 (Reuters) – The Russian rouble firmed on Thursday, crossing the 70 mark against the euro as it retained artificial support from capital controls, while stocks indexes inched lower.

The rouble has become the world’s best-performing currency this year as it obtained support from capital controls that Russia had to impose to shield the financial sector in late February after Moscow sent tens of thousands of troops into Ukraine.

At 0746 GMT, the rouble was 0.9% stronger at 66.59 against the dollar RUBUTSTN=MCX and gained 1.3% to trade at 69.54 against the euro EURRUBTN=MCX, hovering around levels where it used to trade before the COVID-19 pandemic hit in 2020.

The rouble could firm to 65 to the dollar during the day, Promsvyazbank said in a note.

The rouble is driven by export-focused companies that have to convert their foreign currency revenues, while demand for foreign exchange is limited as imports into Russia have waned amid disruption in logistics and sweeping Western sanctions.

In the longer run, the rouble may see some downside pressure mounting from an increase in imports after Russia allowed so-called parallel imports of goods, analysts say.

Last week, Moscow published a list of goods from foreign carmakers, technology companies and consumer brands that the government has included in a “parallel imports” scheme aimed at shielding consumers from business isolation by the West. nL5N2WY56S

Russian stock indexes were down. The dollar-denominated RTS index .IRTS shed 0.7% to 1,116.2 points. Its rouble-based peer MOEX .IMOEX was 1.4% lower at 2,353.1 points.

For Russian equities guide see RU/EQUITY

For Russian treasury bonds see 0#RUTSY=MM

(Reporting by Reuters;
Editing by Robert Birsel)