LONDON Mon Oct 6, 2014 6:03am EDT
LONDON Oct 6 (Reuters) - Russia's rouble sank to a record low on Monday, battered by the triple whammy of Western sanctions, falling oil prices and a rising dollar that has turned many investors against emerging markets.
The rouble hit 40.05, a near 23 percent drop since the start of the year, and Russia's central bank shifted its target exchange rate corridor for the currency by 10 kopecks to 35.50 to 44.50 roubles versus a dollar-euro basket.
"All emerging market currencies are suffering from the stronger dollar trend. I would expect this to continue but the rouble seems to be the most vulnerable of all," said Tatiana Orlova, strategist at Royal Bank of Scotland.
"The main reason why the rouble is weakening and is forcing the central bank to move the band is the acute shortage of hard currency which is being caused to some extent by the sanctions which have caused a shutdown of external borrowing."
Bucking the general emerging currency trend, the South African rand rose half a percent off recent six-month lows on news deputy central bank governor Lesetja Kganyago would succeed Governor Gill Marcus next month.
"Mr Kganyago's appointment is market positive since he brings both institutional knowledge of the (central bank), the broader financial sector and government experience, and credibility within the ruling African National Congress," Barclays analysts told clients.
Emerging stocks appeared headed for a second consecutive session of gains, tracking firmer developed markets and boosted also by bargain hunters who moved to take advantage of the five-month lows reached the previous week.
MSCI's emerging equity index gained 0.45 percent, bringing it 1.3 percent off the lows hit last Thursday. By Friday, the index had fallen 10 percent over the past 21 days.
Hong Kong's Hang Seng index posted its strongest daily gain for more than a month, driven up more than 1 percent by strong U.S. jobs data late last week and as pro-democracy activists scaled down protests, easing political tensions.
In Europe, Bulgarian stocks sank 0.5 percent after the centre-right GERB party won a weekend election but fell short of a majority, complicating any attempt to solve a bank crisis and revive the economy.
Other emerging European stock markets gained with Warsaw up 0.6 percent and Prague and Bucharest each gaining 0.4 percent.
Meanwhile, investors were watching for Brazilian asset price moves after pro-business candidate Aecio Neves managed a late surge in the first round of the weekend presidential election to stand in second place to incumbent Dilma Rousseff .
Five-year credit default swaps (CDS) closed on Friday at 176 bps, just off six-month highs hit earlier in the week, but were untraded by 0830 GMT on Monday, Markit data showed.
In bond news, Kazakhstan fired the starting gun on a dual tranche dollar Eurobond, its first in over a decade. Initial yield guidance was set at 175 basis points and 230 bps over mid-swaps for the 10- and 30-year tranches respectively.
For GRAPHIC on emerging market FX performance 2014, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2014, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2014, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2014, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see ) (Additional reporting by Sujata Rao; Editing by Ruth Pitchford)
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