Emerging-market stocks rose, led by financial and telecommunications companies, as the European Central Bank cut its deposit rate below zero to counter the prospect of deflation. Russia’s ruble rallied.
Turkey’s widening current-account deficit and record low yields will weaken the lira over the next three months, slamming the brakes on this year’s bond rally, according to Barclays Plc, the top forecaster for the currency.
Polish shares fell the most in June as leaked recordings of a conversation between the central bank chief and a minister sparked a political crisis. The zloty pared losses as Prime Minister Donald Tusk defended the policy maker.
The third-highest local-currency yields aren’t enough to lure Turks, who are putting record amounts of cash into dollar deposits on concern the lira is vulnerable in the run-up to presidential elections.
Hungary’s forint, the worst performing emerging-market currency in the past year, will probably rally in 2011 as the government seeks to use private pension fund assets to plug its budget shortfall, according to KBC Groep NV, Barclays Capital and UniCredit SpA.
The world’s best bond and currency rally risks reversing as Hungarian Prime Minister Viktor Orban stalls on conditions for a bailout, according to BlackRock Inc., Citigroup Inc. and Royal Bank of Scotland Group Plc.