Coronavirus takes its toll on financial markets

Concerns about the outbreak of coronavirus have taken their toll on the region’s financial markets over the past month. While the direct trade exposure of Emerging Europe to China is limited and there have been few reported cases of the virus in the region, currencies have come under pressure. The falls in the Russian ruble and Turkish lira support our view that monetary easing cycles are near an end. Elsewhere, the Hungarian forint and Romanian leu have fallen to fresh record lows against the euro and the Czech koruna has given up this year’s gains, which were driven by expectations for monetary tightening. We think that currencies will fall further by the end of the year.