OREANDA-NEWS. February 12, 2015. The naira fell 2 percent on Wednesday and currency forwards priced in more devaluation to come as Nigeria's political and security crisis escalates, while other emerging markets also retreated in face of a stronger dollar.

The naira is down more than 10 percent against the dollar this year despite repeated central bank interventions, weighed on by the postponement of Feb. 14 elections, weak oil prices and an Islamist insurgency. Standard and Poor's on Tuesday placed Nigeria on creditwatch negative.

One-year non-deliverable forwards priced the naira at 268 per dollar.

"Investors are waiting for another formal devaluation. The question is can the central bank hold on until elections before making the move?," Renaissance Capital's head of research, Charles Robertson, said.

The jump in overnight bank funding costs to 100 percent highlighted the strain on the currency regime, he said.

On stocks and bonds, the Lagos equity index, one of the main components of the MSCI frontier index, is down 16 percent year-to-date while Nigeria's 2023 dollar bond fell one cent on Wednesday to stand 7 cents lower since the end of 2014. .

"It's not easy to pull money out of Nigeria, the market is not that liquid. I suspect people who had maturing bonds have been taking money out and equity funds who were receiving cash have been putting it elsewhere (in other frontier markets)," Robertson said, forecasting that the naira would settle around 220 per dollar.

Most other emerging markets were also subdued as the dollar hit a one-month high, U.S. 10-year yields headed back to 2 percent and euro zone ministers met to discuss Greek debt.

Greek stocks fell 3 percent.

Leaders of Ukraine, Russia, Germany and France were meeting in Belarus to try to reach a peace deal for Ukraine. The rouble eased 1 percent to 66.12 per dollar while Ukraine's bonds were steady at around 50 cents in the dollar despite signs the West is mulling a larger aid package.

"Failure to make any concrete progress (in talks) could easily put dollar/rouble back on a path toward 70," Sberbank said in a note.

Central Europe was pressured by the conflict in Ukraine and the turmoil in Greece, with Hungarian shares down 1 percent. Pharma company Gideon Richter plunged 2.5 percent after reporting a 40 percent revenue fall in Ukraine.

The forint was flat, despite data showing a 1.4 percent fall in annual inflation. Forwards are pricing 30-40 basis points of rate cuts in coming months, starting in March.