EMERGING MARKETS-EM currency index hits record high as dovish Fed bets weaken dollar

(Updated at 0900 GMT)

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Thai baht hits highest since January

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Israel Q2 GDP misses estimates

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Absa Group shares jump after results

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EM stocks rise 0.7%

By Lisa Pauline Mattackal

Aug 19 (Reuters) – Emerging market currencies gained against a softer dollar on Monday, lifting MSCI’s index tracking them to a record high on growing hopes of stable economic growth and looser monetary policy in the United States.

The dollar weakened 0.3% against a basket of currencies, lifting MSCI’s international emerging market currency index 0.6% to a record high at the start of a week packed with central bank events.

Asian currencies led gains, notably the Korean won, Malaysian ringgit and Thai baht. The baht and Thai stocks were also lifted by better-than-expected gross domestic product data.

Emerging market assets looked set to build on gains from the previous week as data pointing to U.S. economic growth soothed worries about slowing global demand.

Focus will now be on U.S. Fed Chair Jerome Powell’s Friday speech in Jackson Hole, where investors anticipate he will acknowledge the case for easing borrowing costs.

“Unless we hear Powell hint that the Fed are not ready to ease, or that the tone is skewed towards a 50 bps cut, then what we hear should marry almost perfectly to market pricing,” Chris Weston, head of research at Pepperstone, said.

An index of emerging market stocks gained 0.7% after rising nearly 3% in the previous week.

A number of emerging market central banks will also meet this week, with interest rate decisions expected in Indonesia, Thailand, South Korea and Turkey.

Chinese policymakers are also seen keeping key loan prime rates unchanged on Tuesday.

South Africa’s rand built on a nine-day winning streak, and was up 0.4% ahead of inflation data due on Wednesday.

The country’s main stock index continued to cruise at record highs and was up 0.9%, led by a nearly 5% rise in shares of lender Absa Group after the company reported results.

The Russian rouble steadied against the dollar, edging 0.1% higher, but still remains down more than 4% since Ukraine launched its ongoing attack in the Kursk region.

Currencies in central Europe were mixed against the euro as it rose against the dollar. The euro rose 0.2% versus the Polish zloty and was flat against the Czech crown .

Israel’s shekel weakened 1.4% against the dollar after four straight sessions of gains, after data on Sunday showed the economy grew 1.2% in the second quarter of 2024, less than the 4.4% forecast in a Reuters poll.

Polish stocks slipped 0.1%, after the main index notched its best week in four years on Friday.

Local markets in Hungary were closed for a holiday.

HIGHLIGHTS:

** China manages to halt bond bulls in their tracks, for now

** GRAPHIC-Take Five: How deep a cut?

** Philippines, China trade blame after vessels collide in the South China Sea

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(Reporting by Lisa Mattackal in Bengaluru; Editing by Shounak Dasgupta)

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