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EM stocks rise 0.5%, currencies up 0.1%
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Turkish central bank rate decision due at 1100 GMT
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South Africa's producer prices data also coming up
By Shubham Batra and Amruta Khandekar Feb 23 (Reuters) - Emerging market stocks rose on Thursday, rebounding from a seven-week low as investors looked beyond the Federal Reserve's minutes which reinforced a hawkish tone, while regional currencies also moved higher against a weaker dollar. Nearly all Fed policymakers backed further slowing the pace of rate hikes at the U.S. central bank's last policy meeting, but indicated that curbing high inflation would be the "key factor" in how much further rates need to rise, the minutes released on Wednesday showed. The MSCI EM equities index was up 0.5%, having hit its lowest since early January in the previous session on concerns around interest rates staying high for longer as well as geopolitical tensions ahead of the Ukraine war's one-year anniversary. U.S. Treasury Secretary Janet Yellen stepped up calls on Thursday for increased financial support to Ukraine to help it battle the Russian invasion. Also supporting EM equities, shares in South Korea ended 0.8% higher, as the country's central bank held interest rates steady and suggested the monetary tightening campaign had ended. Regional currencies also moved up 0.1% as the dollar ceded some ground after markets warmed up to the idea the Fed is likely to stay on its aggressive rate-hike path.
The Turkish lira was little changed at 18.878 against the dollar, but hovered around its record low, ahead of the central bank's interest rate decision later in the day. A Reuters poll of economists forecasts the central bank is likely to cut its policy rate by 50 basis points to 8.5% following massive earthquakes that killed more than 43,000 people in Turkey's southeast. "Even before Turkey's disastrous earthquakes, President Tayyip Erdogan had started calling for rates to be lowered further," wrote Tatha Ghose, FX analyst at Commerzbank in a note. "If the CBT (Central Bank of Turkey) were not to cut rates today, this would risk being viewed as political treason, or as refusal to support the economy during a humanitarian catastrophe. Hence, a rate cut is very likely today." After a healthy start in 2023, emerging market assets have come under pressure from speculation of tighter U.S. monetary policy. The South African rand dipped 0.6%, losing all the ground gained in the previous session following the finance minister's budget speech, with producer inflation data for January due later in the day.
Russia's rouble climbed 0.6%. (Reporting by Shubham Batra and Amruta Khandekar in Bengaluru Editing by Mark Potter)
