Emerging market currencies firmed against a soft dollar on Monday, with U.S. Federal Reserve Chairman Jerome Powell's dovish comments serving as a tailwind, while developing world stocks rose on strong U.S. jobs data.
Powell on Friday said the Fed would be patient and flexible in policy decisions this year, setting the stage for emerging market currencies to firm against a weakened dollar on Monday.
Stocks in emerging markets followed the lead their U.S. peers set on Friday, gaining as some fears about slowing global growth were soothed. U.S. jobs data released on Friday showed higher wages and 312,000 jobs created in December, well above market expectations.
"Strong U.S. labour data and a wait-and-see Fed have kept market pricing of a 2019 rate hike minimal and given 'risky' currencies a fillip," Kit Juckes, global head of FX strategy, Societe Generale, said in a note.
MSCI's index of emerging market currencies was up 0.3 percent while its developing world stocks index jumped 1.2 percent - a climb which set it on pace for its highest closing level in over three weeks.
While Chinese officials meet their U.S. peers to discuss trade this week, many investors are sceptical an end to the bruising trade war between the world's top two economies is yet in sight.
"There is certainly some positive sentiment in the market related to the trade talks but we think they will struggle to reach an agreement," said Jason Tuvey, a senior EM economist with Capital Economics.
"There are various parts, when it comes to intellectual property, for example, where both sides are very far apart."
Nevertheless, a move by China's central bank to cut the amount of cash banks must hold as reserves played into the Shanghai Composite index tacking on 0.7 percent, having already climbed over two percent on Friday.
Equities in trade-sensitive South Korea and Taiwan, rose 1.3 percent and 2.2 percent, respectively.
Russia's rouble was 0.4 percent firmer against the dollar. Global prices of oil LCOc1 , a key export, jumped more than 1.5 percent, supported by supply cuts by major producers. O/R
Russian equities gained 1.3 percent, pushed higher by energy stocks.
South Africa's rand firmed 0.4 percent while stocks on the Johannesburg Stock Exchange's Top-40 index were on track to notch their highest closing level in a little short of two months.
Materials stocks supported a chunk of the index's 1.4 percent rise, with local shares of mining giant Anglo American gaining 2.1 percent.
In Europe, the Czech crown touched a three and a half-month peak against the euro during the session, with a central bank board member saying in an opinion piece that interest rates should continue to rise until there is a clear view of a recession risk or sign that inflation is tamed.
(Reporting by Aaron Saldanha in Bengaluru, Editing by William Maclean) ((mailto:Aaron.Saldanha@thomsonreuters.com; +91 80 6749 1130; Reuters Messaging: Aaron.Saldanha@firstname.lastname@example.org))