EMERGING MARKETS-Martial law rumours rattle S. Korean won; Rouble set for best week in over a year

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EM stocks up 0.3%; FX flat

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Won down 0.4%; KOSPI closed down 0.6%

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India holds interest rates at 6.50%

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Rouble rebounded past 100 mark

By Pranav Kashyap

Dec 6 (Reuters) – South Korean assets took a significant hit on Friday amid fresh reports of a potential second martial law declaration, while the Russian rouble rose past the 100 mark.

The South Korean won fell as much as 1.1% against the U.S. dollar before stabilising to trade 0.4% lower, with market participants suspecting central bank intervention for the second time this week.

The KOSPI index closed lower by 0.6%, reflecting the day’s turmoil.

South Korea’s main opposition Democratic Party reported that lawmakers were on alert after numerous reports about another martial law declaration, according to Yonhap news agency.

The won tumbled 1.8% over the week, poised to mark its steepest weekly decline in over two months if the losses persist.

The Russian rouble rebounded past the 100 mark against the U.S. dollar, with a 1.8% increase to 99.5. This week, it has rallied nearly 6%, positioning itself for its best weekly performance in over a year.

President Vladimir Putin removed the option for gas buyers to convert currencies into roubles at the U.S.-sanctioned Gazprombank.

Kirill Tremasov, an adviser to the central bank’s governor, indicated that high interest rates might persist for another 2-3 quarters before easing could commence.

As of 1013 GMT, the MSCI EM equities index rose 0.3%, reaching 1106 points.

In the lead-up to Romania’s presidential runoff vote, thousands gathered in the capital, Bucharest, on Thursday night to rally in support of democracy. As the nation prepares for Sunday’s election, the outcome could potentially see a far-right EU critic triumph over a pro-European centrist candidate.

Romania’s leu was steady against the euro at 4.9774.

The Turkish market regulator, Capital Markets Board, said it would remove the short selling ban on the top 50 stocks of Borsa Istanbul.

In South Africa, the government sold 950 million rand ($52.71 million) of its 2043 and 2058 inflation-linked bonds at auction.

The country’s net foreign reserves fell to $60.619 billion at the end of November. The rand softened 0.1% against the dollar.

Meanwhile, Ghana gears up for its legislative and presidential election set for Saturday.

In Asia, the Reserve Bank of India maintained its key interest rate and cut the cash reserve ratio that banks are required to hold, thereby easing monetary conditions amid slowing economic growth.

The rupee, which hit record lows earlier this week, was last seen trading flat at 84.66 to the dollar.

“The lowering of the cash reserve ratio does show that it is turning more concerned about the growth outlook. But we doubt that the MPC will feel comfortable cutting the repo rate until its April meeting,” said Shilan Shah, deputy chief EM economist at Capital Economics.

The dollar has receded this week, as markets increasingly anticipate a Fed rate cut in December, offering a tailwind for emerging market currencies.

In other news, donor countries have pledged a record $100 billion three-year replenishment of the World Bank’s fund for the poorest nations, providing a vital lifeline for their struggles against crushing debts, climate disasters, inflation and conflict.

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(Reporting by Pranav Kashyap in Bengaluru)

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