EMERGING MARKETS-Attention shifts back to Fed from Iraq, Ukraine

LONDON, June 17 Tue Jun 17, 2014 8:56am EDT

LONDON, June 17 (Reuters) - Emerging market assets were calmer on Tuesday, as attention shifted from Iraq and Ukraine back towards the U.S. Federal Reserve's next move.

MSCI's main emerging market share index was looking for its first rise in five days, and most Asian and central and eastern European currencies were steadier after days of geopolitical unease over Iraq.

"Yesterday, we had this very broad sell-off, but today we are back to a calmer situation ahead of the Fed," said Murat Toprak, a director of FX strategy at HSBC in London. "The Iraqi situation has been partly priced in."

The U.S. central bank is expected to press on with its $10 billion-a-month reductions in stimulus on Wednesday. But it is also expected to nudge down its economic forecasts, leaving market watchers eyeing any new hints on future rate rises.

For emerging markets, rising rates in steadier economies like the U.S. make the yield on their assets comparatively less attractive. That prospect led to a widespread EM sell-off both at the beginning of the year and last May and June.

For now, though, markets were taking a breather after an anxious few days. The costs for protecting against a default by Russia and Iraqi neighbour Turkey were little changed and bond market moves were subdued generally.

The South African rand was firmer at $10.75 and stocks edged up for a second day after platinum producers and mining union AMCU agreed on the main struts of a pay offer they hope will end a long-running strike.

Russian and Ukrainian assets, however, were still suffering from their countries' standoff after Gazprom effectively turned off Ukraine's gas on Monday in a long-running dispute over payments and prices.

The rouble and dollar-denominated Russian stocks both fell towards their lowest levels in almost two weeks as hopes of a near-term resolution faded badly.

"We will stick to our position of not investing in Ukraine," said Viktor Szabo, a fund manager at Aberdeen Asset Management. "And in Russia we remain extremely cautious."

MESSY FOR ARGENTINA

Argentina's bonds also remain under pressure after the U.S. Supreme Court on Monday threw out the country's latest appeal against bondholders still demanding to be paid in full after its 2001 default on $100 billion of sovereign debt.

President Cristina Fernandez vowed to find a way to service Argentina's other bonds after the decision. But with the legal difficulties in doing so pushing the country closer to another default, CDS hit a new five-month high of 2,273 after a huge spike on Monday.

"The situation in Argentina is important, but not as important as the devaluation that happened in January," said HSBC's Topak.

"That happened in the context of a broad emerging market sell-off. This time the situation for EM globally is significantly better. That is probably the main reason why the reaction to Argentina has been quite mild."

In eastern Europe, Poland's zloty steadied and shares in Warsaw bounced back after Poland's central bank governor, Marek Belka, said he did not plan to resign over a leaked recording of him using an expletive to describe bank colleagues and discussing the removal of the finance minister.

Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley Emrg Mkt Indx 1046.90 +0.62 +0.06 +4.41

Czech Rep 1034.17 -0.22 -0.02 +4.56

Poland 2462.21 +15.20 +0.62 +2.55

Hungary 18784.39 -67.53 -0.36 +1.19

Romania 6787.35 -74.09 -1.08 +4.52

Greece 1263.09 +0.78 +0.06 +8.64

Russia 1344.86 -12.94 -0.95 -5.76

South Africa 45824.44 +21.40 +0.05 +10.47

Turkey 78487.43 +841.71 +1.08 +15.76

China 2066.70 -19.28 -0.92 -2.33

India 25521.19 +330.71 +1.31 +20.55

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2014

Czech Rep 27.43 27.42 -0.02 -0.36

Poland 4.14 4.14 +0.08 +0.31

Hungary 307.33 307.06 -0.09 -3.37

Romania 4.40 4.39 -0.22 +1.32

Serbia 115.37 115.33 -0.03 -0.75

Russia 34.75 34.61 -0.40 -5.35

Kazakhstan 183.39 183.51 +0.07 -15.86

Ukraine 11.85 11.88 +0.25 -30.55

South Africa 10.74 10.75 +0.06 -2.74

Kenya 87.60 87.90 +0.34 -1.60

Israel 3.45 3.45 -0.04 +0.48

Turkey 2.14 2.14 +0.27 +0.45

China 6.23 6.23 -0.02 -2.77

India 60.11 60.17 +0.10 +2.82

Brazil 2.23 2.23 -0.02 +5.73

Mexico 13.05 13.05 +0.01 -0.10

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 287 0 0.02 679.04

All data taken from Reuters at 1151 GMT. Currency percent change calculated from the daily U.S.

close at 2130 GMT (Reporting by Marc Jones; Editing by Larry King)