FX hits highest level since March as dollar slips

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Czech interest rate decision due later in the day

Adani's market losses top $100 bln

EM stocks and currencies rise 0.4% each

By Bansari Mayur Kamdar

Feb 2 (Reuters) -Currencies in emerging markets rose on Thursday as the dollar tumbled after the U.S. Federal Reserve said "disinflationary process has started" in the world's largest economy, while the Czech crown was subdued ahead of a central bank decision.

The crown CZK= was flat against the euro by 0858 GMT ahead of the Czech National Bank's decision at 1330 GMT, where the central and eastern European country's main rate is expected to stay at more than two-decade high of 7%.

"The stage is set for at least a couple of quarters' status quo for Czech monetary policy, with strong likelihood of the next move in rates being down rather than up," said Tatha Ghose, FX analyst at Commerzbank Research, in a note.

Overall, currencies in emerging markets .MIEM00000CUS extended gains to hit their highest level in more than nine months following the overnight slide in the dollar as investors took a dovish cue from Fed Chair Jerome Powell's remarks.

The Federal Reserve said it had turned a corner in the fight against inflation, raising hopes in the market that the end of the central bank's rate-hike campaign was near, although Powell also signalled that interest rates would continue rising and that cuts were not in the offing.

Investors were now focused on what the Bank of England and European Central Bank had to say in their monetary policy update.

Stocks in emerging markets .MSCIEF rose 0.4%.

Limiting gains on the broader index, China and Hong Kong stocks retraced gains seen in the early trading hours and finished lower, as investors stayed on the sideline and awaited further signs of recovery in the pandemic-hit economy.

Indian shares slipped as the week-long rout in Adani Group stocks persisted, erasing $100 billion in market value.

"Indian shares were trading at a premium last year and that premium is now at risk as investors realize maybe the underlying fundamentals are not as strong as many thought," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

"Adani may have started a confidence crisis in Indian shares and that could have broader market implications."

Overall, Goldman Sachs forecasts MSCI's emerging stocks index to reach 1,150 over the next twelve months, adding that they expect Asia to offer the largest upside and Latin America the least.

Elsewhere in emerging markets, the Turkish lira TRY= edged lower against the dollar, while Israel's shekel ILS= was trading flat.

The Russian rouble RUBUTSTN=MCX inched higher against a weaker dollar, boosted by rising oil prices even as it lost ground against other major currencies.

For GRAPHIC on emerging market FX performance in 2023, see http://tmsnrt.rs/2egbfVh

For GRAPHIC on MSCI emerging index performance in 2023, see https://tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets nTOPEMRG

For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB

Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Arun Koyyur


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