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EMERGING MARKETS-Dollar strength pressures emerging currencies, lira worst hit
December 4, 2017 / 10:26 AM / 9 days ago

EMERGING MARKETS-Dollar strength pressures emerging currencies, lira worst hit

LONDON, Dec 4 (Reuters) - Emerging equities rose from two-week lows on Monday helped by a key growth-boosting U.S. tax overhaul, but currencies fell against the stronger dollar, led by the Turkish lira under pressure from rising inflation.

MSCI’s benchmark emerging stocks index rose 0.5 percent, ending three straight days of losses. Both South Korean and Indonesian stocks rose over 1 percent, whilst Chinese blue chips gained 0.5 percent.

The moves reflected a broad-based rally in global equity markets following the U.S. Senate’s approval of a tax overhaul on Saturday, which investors hope will ultimately boost corporate earnings and growth.

Even Turkish banks, which have been under pressure due to worries about potential U.S. fines, bounced 1 percent, with the broader Turkish stock market up 0.5 percent.

“People are pleasantly surprised by the Senate passage of the U.S. tax bill, which is pushing up short-term interest rates and U.S. growth expectations,” said Koon Chow, an emerging markets strategist at UBP. “This is good for equities globally, but not so good for currencies relative to the dollar.”

The dollar firmed 0.3 percent, adding to headwinds for emerging currencies such as the lira, which plumbed record lows in November.

The lira weakened 0.25 percent after data showing inflation spiked to 12.98 percent in November, the highest in 14 years.. Turkish assets have also been in the firing line due to an ongoing U.S. court case which has raised tensions between Ankara and Washington.

JPMorgan said its monthly survey showed investors had sharply cut lira overweight positions in November, while the fall in Turkish local debt positioning was larger than in any other surveyed market.

Expectations are mounting that the central bank will act at its Dec. 14 meeting to put a floor under the tumbling lira and tame inflation. Chow predicted a rate rise of around 100 basis points.

The South African rand was one of the few currencies to firm, up 0.4 percent on indications that Deputy President Cyril Ramaphosa was doing well in nominations to become the next leader of the ruling ANC party.

Ramaphosa is seen as more business-friendly than rival candidate Nkosazana Dlamini-Zuma.

In the Gulf, Qatar stocks bounced over 2 percent to near one-month highs on hopes that Doha can resolve its diplomatic dispute with four other Arab countries at a summit this week.

Saudi stocks were trading at almost two-month highs after jumping 1.2 percent on Sunday, and Abu Dhabi shares gained 1 percent.

In emerging Europe, the Polish zloty firmed 0.2 percent against the euro. The Polish central bank is expected to keep interest rates on hold at a record low of 1.5 percent at its Tuesday meeting despite a rise in inflation coupled with robust economic growth.

For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see 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 1122.07 +6.13 +0.55 +30.13

Czech Rep 1066.72 +2.74 +0.26 +15.75

Poland 2380.48 -9.44 -0.39 +22.21

Hungary 37844.45 -344.36 -0.90 +18.25

Romania 7791.69 -4.52 -0.06 +9.97

Greece 752.54 +3.88 +0.52 +16.92

Russia 1127.60 -5.73 -0.51 -2.15

South Africa 53040.34 +151.98 +0.29 +20.82

Turkey 04164.79 +605.81 +0.58 +33.31

China 3310.37 -7.25 -0.22 +6.66

India 32867.52 +34.58 +0.11 +23.44

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2017

Czech Rep 25.57 25.54 -0.13 +5.61

Poland 4.21 4.21 +0.13 +4.67

Hungary 313.17 313.74 +0.18 -1.39

Romania 4.63 4.63 -0.06 -2.07

Serbia 119.20 119.07 -0.11 +3.48

Russia 58.93 58.87 -0.10 +3.96

Kazakhstan 332.81 331.25 -0.47 +0.25

Ukraine 27.17 27.08 -0.33 -0.63

South Africa 13.69 13.69 +0.05 +0.32

Kenya 103.00 102.90 -0.10 -0.61

Israel 3.49 3.48 -0.26 +10.21

Turkey 3.92 3.91 -0.26 -10.09

China 6.62 6.61 -0.04 +4.93

India 64.36 64.51 +0.24 +5.57

Brazil 3.26 3.26 +0.00 -0.15

Mexico 18.64 18.62 -0.09 +11.13

Debt Index Strip Spd Chg %Rtn Index

Sov‘gn Debt EMBIG 313 -2 .01 8 03.71 1

Reporting by Claire Milhench; Editing by Raissa Kasolowsky

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