Stocks, FX gain on improving sentiment, Turkish lira at new low



* Thai baht best performing EM currency this week

* Turkish lira worst weekly performer

* Stocks set for best week since early-Sept

By Ambar Warrick

Oct 15 (Reuters) - Emerging market stocks hit a near three-week high on Friday tracking strong overnight cues from Wall Street, while most currencies rose and were headed for weekly gains as risk appetite appeared to have improved.

But Turkey's lira TRY= lagged its peers, sinking 0.6% to a record low of 9.2252 to the dollar, as recent government interference in the central bank saw investors questioning the bank's independence.

Analysts are now expecting a possible interest rate cut when the Turkish central bank meets next week, despite inflation surging to nearly 20% this year. The lira was the worst performing emerging market (EM) currency this week.

"There is a good chance the monetary policy committee will cut the policy rate further – perhaps by another 100bps to 17.00% – in the remainder of this year because of the continuing political influence on monetary policy," Credit Suisse analysts wrote in a note.

Broader EMs fared far better, with the stock index .MSCIEF up 1%, tracking strong gains in Wall Street after a batch of strong quarterly earnings.

EM stocks were also set to add 1.8% this week, their best gain since early-September, as sentiment appeared to have improved after bruising losses in recent sessions.

Bank of America data showed EM debt and equities had their largest outflow of funds in 10 weeks, in the week to Wednesday.

"It seems that with equities already correcting decently lower, investors may have jumped back into the action due to fear of missing out," Charalambos Pissouros, head of research at JFD Group, wrote in a note.

Most EM currencies rose on Friday, with South Africa's rand ZAR= leading gains across Europe, the Middle East and Africa (EMEA) with a 0.6% jump.

The rand was the best performer in EMEA this week. It has a relatively higher yield than its EM peers and tends to show large gains when sentiment improves.

Russia's rouble RUB= was set to add 0.7% this week, benefiting from stronger oil prices. Major crude stocks drove Russian stocks .IMOEX to record highs this week.

The Thai baht THB= was the best performing EM currency this week, adding over 1.8% amid growing hopes the lifting of COVID curbs will help the tourism-reliant economy to recover.

In central Europe, data showed Polish inflation rose in September from last month, likely pointing towards more pressure on the central bank to further raise interest rates. The zloty EURPLN= was flat to the euro.

For GRAPHIC on emerging market FX performance in 2021, see Link For GRAPHIC on MSCI emerging index performance in 2021, see Link

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see



Emerging market currencies this week Link



Reporting by Ambar Warrick; Editing by Krishna Chandra Eluri

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