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EMERGING MARKETS-Fading dollar lifts emerging stocks, currencies

LONDON, Jan 23 (Reuters) - Emerging stocks gained and Mexico’s peso led a currencies rally on Monday as markets took a breather following Donald Trump’s inauguration as U.S. president, but Turkey’s lira remained under pressure ahead of a crucial central bank meeting.

MSCI’s emerging markets index snapped a two-day losing streak to rise 0.6 percent, lifted by bourses in Asia and gains in South Africa.

The gains came in the wake of the dollar sliding broadly to touch its weakest level in six weeks after Trump struck a protectionist tone in his debut speech, sowing doubts on the upbeat outlook for the U.S. economy which had been fuelled by his pledges of tax cuts and stimulus.

“The pressure remains on the dollar, and that is causing a general positive sentiment towards emerging markets ... investors are starting to doubt just how much he will deliver,” said Per Hammarlund, chief emerging markets strategist at SEB.

“It is just a temporary breather, it is unlikely to last. As we have sen before, he may be quiet for a short time or shift his focus to something else, but ... we will not see him backtrack on his suspicious attitude on trade with cheaper countries such as China and Mexico.”

Mexico’s peso, which had born the brunt of investor angst over Trump’s policies, led the rally across currencies, gaining nearly 1 percent and trading at its strongest in 13-days. It had chalked up its biggest gains in more than two months on Friday after Trump did not mention the country directly in his inauguration speech.

South Africa’s rand nearly matched those gains while Russia’s rouble struggled 0.4 percent stronger despite oil prices reversing their initial gains and falling 1 percent.

Turkey’s lira remained the exception however, weakening as much as 0.5 percent as investors showed nerves ahead of a central bank meeting on Tuesday widely seen as a major credibility test in the face of a tumbling currency.

Fifteen out of 18 economists polled by Reuters expect the central bank to increase its benchmark repo rate, with nine of them forecasting an increase of 50 basis points.

“The lira has stabilised in the last few days ... There is a substantial risk that the central bank will not hike at all,” said Hammarlund. “The problem is: It will then just be a matter of time before there will be another run on the lira.”

Israel’s central bank is expected to keep interest rates at a record low of 0.1 percent for the 23rd month in a row when it announces it decision later in the day.

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

on year

Morgan Stanley Emrg Mkt Indx 898.44 +5.16 +0.58 +4.19

Czech Rep 930.80 +2.27 +0.24 +1.00

Poland 2003.51 -2.50 -0.12 +2.85

Hungary 32881.84 -0.08 +0.00 +2.75

Romania 7280.99 -8.74 -0.12 +2.77

Greece 641.36 +2.20 +0.34 -0.35

Russia 1135.56 -3.43 -0.30 -1.46

South Africa 45953.64 +172.85 +0.38 +4.67

Turkey 83105.94 +38.79 +0.05 +6.36

China 3136.64 +13.50 +0.43 +1.06

India 27117.34 +82.84 +0.31 +1.84

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2017

Czech Rep 27.00 27.01 +0.04 +0.03

Poland 4.37 4.37 -0.03 +0.77

Hungary 309.48 309.32 -0.05 -0.21

Romania 4.50 4.49 -0.04 +0.88

Serbia 123.95 123.95 +0.00 -0.48

Russia 59.42 59.66 +0.41 +3.11

Kazakhstan 330.95 332.36 +0.43 +0.82

Ukraine 27.30 27.35 +0.18 -1.10

South Africa 13.48 13.59 +0.79 +1.83

Kenya 103.80 103.80 +0.00 -1.38

Israel 3.80 3.80 +0.12 +1.41

Turkey 3.77 3.76 -0.05 -6.35

China 6.85 6.87 +0.27 +1.30

India 68.14 68.05 -0.13 -0.29

Brazil 3.17 3.17 -0.00 +2.67

Mexico 21.35 21.58 +1.10 -2.98

Debt Index Strip Spd Chg %Rtn Index

Sov’gn Debt EMBIG 353 1 .06 7 47.57 1

All data taken from Reuters at 10:24 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.

For GRAPHIC on emerging market FX performance 2016, see tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2016, see tmsnrt.rs/2dZbdP5

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see ) (Editing by Tom Heneghan)

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