Pull back as US yields, dollar rise

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A rise in US Treasury yields and the dollar pressured emerging markets on Friday, with equities easing from 9-1/2 month highs and central Europe leading a general pullback in emerging currencies.

US 10-year yields hit eight-month highs after some Federal Reserve members expressed concern about the bank's open-ended

money printing plan.

They could rise further if data due at 15:30 SA time reveals a continued recovery in US employment levels.

That has taken the edge off appetite for risk assets after a strong start to 2012, with emerging equities down 0.5 percent on the day.

The index has risen more than 2 percent so far this year for its best weekly gain since November.

Investors also trimmed bullish positions in emerging currencies after a run of gains that had forced several Asian central banks such as South Korea and Singapore to intervene.

“Globally there is a small correction today and consolidation before the US payrolls ... If we see a further correction in US Treasuries, there could be more spillover into emerging markets,” said Guillaume Tresca, a strategist at Credit Agricole in Paris.

In central Europe, the Hungarian forint fell 1 percent as jobs data showing a dire picture of the economy continued to undermine the forint's double-digit gains of 2012.

The Polish zloty lost 0.6 percent and fell to one-month lows against the euro and the Czech crown fell 0.4 percent versus the euro, touching end-November lows after further verbal intervention by a central banker.

“The market is aggressively shorting the crown and if you get disappointment on central bank FX intervention, there is a chance of a rally,” Tresca said.

Egyptian markets were shut after a roller coaster week that saw the pound plummet to successive record lows against the dollar while the stock market rallied to two-month highs as expectations built of a devaluation.

Emerging dollar bonds outperformed Treasuries, with spreads on the EMBI Global index falling 6 bps to 240 bps. - Reuters


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