Nov 2 (Reuters) – Emerging markets received a boost on Thursday as investors were optimistic that U.S. interest rates have peaked, while Turkey’s central bank governor reiterated the regulator’s commitment to orthodox policy.
MSCI’s index tracking emerging markets stocks .MSCIEF rose 1.7%, its largest daily gain since late-July, while a basket of currencies .MIEM00000CUS strengthened 0.5% to an over one-month high against the dollar by 0923 GMT.
On Wednesday, the U.S. Federal Reserve held the policy rate steady in its current 5.25%-5.50% range.
While Chair Jerome Powell did not rule out another hike, markets judged he was not quite as hawkish as he could have been.
Powell seemed rather cautious at the meeting and investors are more certain now that the Fed is done with hiking at least for this year, said Minna Emilia Kuusisto, chief analyst at Danske Bank.
Emerging markets currencies have been under pressure for the past three months as worries over U.S. rates loomed amid geopolitical tensions.
However, with hopes of U.S. borrowing costs peaking, analysts expect the emerging market currencies to garner positive attention in November.
Meanwhile, Turkey’s BIST 100 index .XU100 advanced 1.5%, its best day in a week, and the lira traded at 28.35 to the dollar.
The central bank vowed to continue gradual monetary tightening after raising its year-end inflation forecasts for this year and the next.
“The outlook has changed a lot for the positive in terms of economic and monetary policy… inflation is expected to remain very high for some time and rate hikes will continue unless something unexpected happens,” Kuusisto added.
The country’s lenders .XBANK also rose 1.3%. On Thursday, the regulator hiked required reserves for FX-protected lira deposits by 5 percentage points.
In central and eastern Europe, Czech’s crown EURCZK=R was little changed ahead of a monetary policy decision due at 1330 GMT.
Most economists polled by Reuters expect the regulator to face a close vote on whether to start cutting interest rates from more than two-decade highs this week or in December.
Poland’s zloty PLN= strengthened 0.4% after rate-setter Ludwik Kotecki said the country’s central bank should leave interest rates unchanged in November, due to significant uncertainty regarding future inflation and the shape of public finances.
Elsewhere, the International Monetary Fund (IMF) reached a preliminary agreement with Somalia that will allow for the release of $100 million in funding under a new 36-month credit programme.
In North Africa, Egypt is also expected to release its interest rate decision later in the day.
(Reporting by Johann M Cherian in Bengaluru; Editing by Sohini Goswami)
