Emerging stocks, currencies sail higher on tepid dollar

Last week a rout spread across emerging assets as investors took fright at the prospect of higher interest rates and less stimulus from developed market central banks

  
By Karin Strohecker

LONDON, July 10 (Reuters) - Emerging stocks rose half a percent on Monday and currencies broadly strengthened, as the afterglow of Wall Street ending the week on a high note and a tepid dollar rekindled investors' risk appetite.

MSCI's emerging markets benchmark posted its best day in two weeks, helped by gains of more than 1 percent in Hong Kong and Russian dollar-stocks. Poland and Turkey also rose 0.6-0.8 percent.

Last week a rout spread across emerging assets as investors took fright at the prospect of higher interest rates and less stimulus from developed market central banks.

Emerging stocks, which have jumped some 16 percent since the start of the year and top performance league tables, look vulnerable to the expected dollar appreciation, Credit Suisse said in a note.



"While long-term fundamentals remain relatively supportive, the short-term picture is more challenging," Credit Suisse said.

"High earnings expectations provide room for disappointment and the relative earnings revisions have been the weakest of all the main regions."

For the time being though, the dollar remains tepid, supporting emerging currencies.

South Africa's rand snapped a three-day losing streak and strengthened 0.6 percent, helped also by parliament challenging a proposal from the anti-graft watchdog to change the central bank's mandate.

Questions over the central bank's mandate and its independence have weighed on assets of Africa's most industrialised nation in recent weeks.

Turkey's lira strengthened 0.4 percent, while Russia's rouble traded flat, giving away earlier gains after oil prices lost steam again.

In Serbia, tame inflation is expected to persuade central bank policy makers to keep the benchmark rate unchanged at 4 percent - the highest interest rate in the region.

"The decision to keep rates unchanged is also supported by the stronger dinar that has led to tighter monetary conditions," Raiffeisen Bank International analysts told clients.

They also noted the dinar had outperformed other central European currencies over the past three months, firming 3 percent against the euro in this period.



All data taken from Reuters at 08:41 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.

(Reporting by Karin Strohecker; Editing by Raissa Kasolowsky) ((karin.strohecker@thomsonreuters.com; +442075427262; Reuters Messaging: karin.strohecker.reuters.com@reuters.net))

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