Russian assets cheer Moscow-Washington diplomacy



* Russian stocks jump 4.5%

* South African rand falls despite rate hike as dollar rallies

* Chile's peso rises after 150-bps rate hike

By Susan Mathew

Jan 27 (Reuters) - Russia's rouble jumped 2.2% on Thursday despite a rally in the dollar and stocks surged after the Kremlin left the door open for dialogue over the Ukraine crisis, while Chile's largest interest rate hike in 20 years lifted that country's currency.

The rouble RUB= outperformed an index of emerging market peers which was pressured by a stronger dollar and higher U.S. Treasury yields following hawkish U.S. Federal Reserve commentary that spurred bets of five or more rate hikes this year.

Strong U.S. economic growth data on Thursday lent weight to the speculations.

South Africa's rand ZAR= fell 0.1% despite an expected 25- basis-point hike from the country's central bank. The bank said monetary policy would remain accommodative for some time.

China's yuan CNY= dropped 0.8%, while Turkey's lira lost 0.3%

But a euro EUR= pressured by the dollar's surge saw central and eastern European currencies EURHUF= EURPLN= EURCZK= rally strongly, bolstered further by easing geopolitical worries about a potential Russian invasion of Ukraine.

Kremlin spokesman Dmitry Peskov said U.S. and NATO statements that Russia's main demands around post-Cold War security arrangements in Europe were unacceptable did not leave much room for optimism, but stopped short of closing the door on diplomacy.

Russia said a pullback in NATO military forces from Eastern Europe would help reduce military tensions in the region.

The rouble RUB= firmed to 77.5 a dollar, retracing losses that pushed it beyond 80 on Wednesday. Sovereign dollar bonds issued by Ukraine and Russia rose, and the cost of insuring exposure to Russia eased. Russia's main stocks index .IMOEX jumped 4.5%, on track for its best session since March 2020.

"We think Russian assets would not sell off as much this time around, unless the worst-case scenario materializes," said strategists at TD Securities.

"We believe that the (central bank) is aware of these risks and, while likely downplaying them in official communications, may adjust the trajectory of monetary tightening to preempt future moves," they said on Wednesday, adding they now expect a 100-basis-point hike from the central bank next month.

Latin American currencies also fared well, with Brazil's real BRBY surging 1.5%, while Mexico's peso MXN= firmed 0.2%.

Chile's peso CLP= rose 1% after the central bank hiked the key rate by 150 basis points to 5.5% overnight, more than the 125 basis points expected by markets.

The move was in line with most emerging market central banks as they try to rein in stubbornly high inflation.

Moody's on Thursday said the newly elected administration's rejection of additional pensions withdrawals is credit positive.

Key Latin American stock indexes and currencies at 1412 GMT: Stock

Latest

Daily % change indexes

MSCI Emerging Markets

1194.96

-1.36

.MSCIEF

MSCI LatAm

2281.17

1.65

.MILA00000PUS

Brazil Bovespa

.BVSP

112769.51 1.33 Mexico IPC

.MXX

0.00

0 Chile IPSA

.SPIPSA

4565.25

0.28 Argentina MerVal

.MERV

0.00

0 Colombia COLCAP

1522.26

-0.34 .COLCAP

Currencies

Latest

Daily % change Brazil real

BRBY

5.3566

1.52 Mexico peso

MXN=D2

20.6994

0.15 Chile peso

CLP=CL

796.2

0.54 Colombia peso

3933.22

-0.23

COP=

Peru sol

PEN=PE

3.8356

-0.27 Argentina peso (interbank)

104.7500 -0.04

ARS=RASL


Reporting by Susan Mathew in Bengaluru; editing by Jonathan Oatis

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