EMERGING MARKETS-Emerging stocks sail to 2-year high on weak dollar


LONDON, March 20 (Reuters) - Emerging stocks hit a two-year
high and most currencies strengthened on Monday, still basking
in the afterglow of the U.S. Federal Reserve meeting and
shrugging off the prospect of more trade protectionism.
    MSCI's emerging market index <.MSCIEF> rose 0.5 percent in
its seventh straight day of rises, lifted by Hong Kong <.HIS>,
Russia <.IRTS> and South Africa <.JTOPI> racking up solid gains.
However, stocks in Turkey <.XU100>, South Korea <.KS11> and much
of emerging Europe <.WIG20> <.BUX> <.ATG> were under pressure.
    Currencies also benefited again from a weaker dollar, which
has been slipping since policy makers at the U.S. Federal
Reserve refrained from signalling a shift to a faster pace of
monetary tightening though they delivered their expected quarter
point interest rate hike last week.
    "A gradual pace of monetary policy normalisation by the Fed,
market optimism that the (U.S. President Donald) Trump
administration will implement a substantial dose of fiscal
stimulus and signs of improvement in economic activity in the
emerging markets are positive factors supporting capital inflows
to risky assets," Rabobank's Piotr Matys wrote in a note.
    South Africa's rand <ZAR=> strengthened 0.5 percent in its
fourth day of gains to hit the strongest level in nearly 20
months while Turkey's lira <TRY=> added 0.3 percent.
    But Russia's rouble <RUB=> fell 0.5 percent, snapping a
three-day winning streak, dragged down by oil prices <LCOc1>
tumbling more than 1 percent. [O/R]
    However, investors were wary after the world's top finance
chiefs failed to agree at a meeting over the weekend on a
commitment to keep international trade free and open.
    That highlighted a global shift towards protectionism,
despite reiterating a warning against competitive devaluations
and disorderly foreign exchange markets. [nL2N1GV096]
    "Capital inflows to the emerging markets, however, are
likely to be reversed if the Trump administration implements
measures that would undermine globalisation - a major driving
factor for export-oriented EM economies," Rabobank's Matys
    Meanwhile, Ukraine's dollar-denominated bonds edged lower
across the curve after the International Monetary Fund postponed
a decision - originally scheduled for Monday - to disburse more
aid to Ukraine in order to assess the impact of an economic
blockade Kiev imposed on separatist-held territory. [nL5N1GW0DO]

For GRAPHIC on emerging market FX performance 2017, see http://tmsnrt.rs/2e7eoml

For GRAPHIC on MSCI emerging index performance 2017, see http://tmsnrt.rs/2dZbdP5

    For CENTRAL EUROPE market report, see [CEE/]
    For TURKISH market report, see [.IS]
    For RUSSIAN market report, see [RU/RUB])

 (Reporting by Karin Strohecker, editing by Ed Osmond)
 ((karin.strohecker@thomsonreuters.com; +442075427262; Reuters
Messaging: karin.strohecker.reuters.com@reuters.net))


This article appears in: World Markets , Fundamental Analysis , Stocks

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