Dollar weakness propelled emerging stocks to near three-year highs on Thursday and some currencies hit multi-month peaks, boosted also by signs of healthy economic growth and a rise in Chinese corporate profits.
European emerging currencies gained less, the rouble especially, an outlier due to fresh U.S. sanctions on Russia.
Overall, emerging assets received a shot in the arm as U.S. Federal Reserve comments on inflation were interpreted as suggesting that a recent growth slowdown may not be temporary, reducing the pressure for interest rate hikes.
The dollar touched 13-month lows against a currency basket .
"This slight change of emphasis regarding how inflation is behaving has delivered a boost to risk appetite, supporting emerging market stocks and currencies as it has drawn down the value of the dollar index," said Inan Demir, senior emerging economist at Nomura.
"The China data will have helped sustain that sentiment," he said, referring to a 19 percent jump in industrial firms' June profits.
MSCI's emerging equity index rose 1 percent to the highest since September 2014, while an index for Asian shares outside Japan approached decade-highs.
Many Asian currencies surged to multi-month highs against the dollar, with the Chinese yuan posting its best session in almost two months and the Thai baht at two-year peaks on a strong economic growth forecast.
In emerging Europe the mood was dampened by the euro's continued rise while the rouble was pressured by U.S. plans for sweeping new sanctions targeting Russian energy, debt, transport and other sectors.
The currency was flat after a 0.7 percent gain on Wednesday against the dollar but is on track for a second week of losses while bond yields are the highest in three weeks on expectations that rate cuts will proceed less slowly.
The Turkish lira firmed 0.2 percent against the dollar after closing one percent higher in the wake of the Fed meeting and the central bank is expected to stick to a hawkish tone at its meeting later in the day.
Demir noted risks to the lira from the euro surge.
"The lira recovery has mostly been a dollar weakness phenomenon, and euro/lira is close to all-time highs still. So the underlying depreciation pressures for the currency are still there – that's another argument for the central bank to keep short-term rates high via tight liquidity management," he said.
The rand was likewise flat near one-month highs hit on Wednesday as markets awaited producer inflation data that is expected to show slowing factory prices.
The zloty weakened 0.3 percent against the euro and stocks fell 0.6 percent, with investors watching for repercussions from a European Commission decision to start legal action against Poland over a controversial judicial overhaul.
Commerzbank advised clients to keep a close eye on Polish political developments, adding: "We see further upside for EUR-PLN in coming weeks."
For GRAPHIC on emerging market FX performance 2017, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see http://tmsnrt.rs/2dZbdP5
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
on year
Morgan Stanley Emrg Mkt Indx 1071.36 +9.07 +0.85 +24.25
Czech Rep 1011.56 -0.29 -0.03 +9.76
Poland 2347.87 -12.39 -0.52 +20.53
Hungary 35593.98 +29.08 +0.08 +11.22
Romania 8332.06 +8.66 +0.10 +17.60
Greece 830.93 +0.72 +0.09 +29.10
Russia 1028.54 +7.94 +0.78 -10.74
South Africa 48804.68 +240.89 +0.50 +11.17
Turkey 08327.43 +1121.27 +1.05 +38.63
China 3249.29 +1.62 +0.05 +4.69
India 32526.56 +144.10 +0.44 +22.16
Currencies Latest Prev Local Local
close currency currency
% change % change
in 2017
Czech Rep 26.03 26.00 -0.13 +3.75
Poland 4.26 4.25 -0.27 +3.36
Hungary 305.18 304.75 -0.14 +1.19
Romania 4.56 4.56 +0.00 -0.60
Serbia 120.33 120.32 -0.01 +2.51
Russia 59.41 59.37 -0.07 +3.12
Kazakhstan 325.90 327.11 +0.37 +2.38
Ukraine 25.90 25.85 -0.19 +4.25
South Africa 12.92 12.90 -0.14 +6.31
Kenya 103.80 103.85 +0.05 -1.38
Israel 3.55 3.56 +0.14 +8.40
Turkey 3.53 3.54 +0.07 -0.19
China 6.74 6.75 +0.24 +3.06
India 64.12 64.31 +0.30 +5.96
Brazil 3.14 3.14 -0.01 +3.64
Mexico 17.61 17.59 -0.15 +17.62
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 323 -1 .06 7 90.23 1
All data taken from Reuters at 08:34 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.
(This article has not been edited by DNA's editorial team and is auto-generated from an agency feed.)
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