By Susan Mathew
May 28 (Reuters) - Emerging market currencies weakened on Tuesday against a stronger dollar, and an index of developing market stocks also fell amid signs that a U.S.-China trade deal may not be struck as soon as hoped.
U.S. President Donald Trump said on Monday that Washington was not ready to make a deal with Beijing, signalling the long-drawn out trade dispute between the world's two largest economies may not get resolved soon. MKTS/GLOB
MSCI's index of emerging market currencies .MIEM00000CUS was down 0.3%, while its shares index .MSCIEF slipped 0.16% as gains in China and parts of emerging Europe were outweighed by losses elsewhere.
"At the moment Trump's comments that he's in no rush to make a deal with China is definitely still a dominating factor for this tentative risk-off sentiment in the EM space," said Simon Harvey, FX analyst at Monex Europe.
Trump, however, said he expected a deal with China in the future. Trade tensions between the two countries have pressured market for almost a year, resulting in the indexes posting declines last year.
Further developments on the trade front will determine if they can sustain the attempt at a rebound in 2019.
Currencies fell across the board as the dollar index .DXY measuring the greenback against a basket of six peers rose 0.13%. FRX/
The South African rand ZAR= slumped 1% to hit a two-month low. .J
South Africa's deputy president, David Mabuza, is set to be sworn in as a lawmaker on Tuesday, a week after he requested a postponement to address accusations he had brought the ruling African National Congress (ANC) into disrepute.
"It raises the risk of Mabuza retaining his vice presidency, and its arguable on how that's going to rejuvenate the party given the recent allegation against him," Monex's Harvey said.
Turkey's lira TRY= eked out gains and looked set to extend a rise after the central bank raised the reserve requirement rates for foreign exchange deposits at commercial banks on Monday.
Turkey's struggling debts markets also had reason to cheer after the country's new retirement-fund guidelines could direct some 2.5 billion lira ($413 million) towards buying domestic government bonds.
But data showing Turkey's economic confidence index tumbled to its lowest level since October capped gains as it shed light on the economy's deteriorating condition.
Elsewhere, Hungary's forint EURHUF= slipped slightly against the euro ahead of a central bank interest rate meeting later in the day when it is expected to keep its rate on hold for the rest of 2019, preferring to tackle rising inflation by letting interbank rates rise, a Reuters poll showed.
"We see risk that at some point, the market will not view it sufficient that the central bank still maintains around -2% negative real interest rate when core inflation is above target and economic growth is above-trend," said analysts at Commerzbank.
"The forint's underperformance versus peers such as the zloty may continue until we receive a clear, hawkish message from the central bank."
Among emerging stocks, a rise in mainland China, Hong Kong and Korean shares did little to buoy the broader index as losses elsewhere in Asia as well as in South Africa weighed, with U.S. stock futures pointing to a lower open.
For GRAPHIC on emerging market FX performance 2019, see http://tmsnrt.rs/2egbfVh
For GRAPHIC on MSCI emerging index performance 2019, see https://tmsnrt.rs/2OusNdX
For TOP NEWS across emerging markets
For CENTRAL EUROPE market report, see CEE/
For TURKISH market report, see .IS
For RUSSIAN market report, see RU/RUB
(Reporting by Susan Mathew in Bengaluru, editing by Ed Osmond)
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