Stocks, currencies firm up ahead of U.S. Fed outcome
* MSCI's EM equities and currencies indexes gain
* U.S. Federal Reserve meeting due to end later in the day
* Asian stocks broadly rise; China stocks up 1%, Taiwan 2%
* Donald Trump-Xi Jinping talks at G20 aid sentiment
By Aaron Saldanha
June 19 (Reuters) - Emerging market stocks rose on
Wednesday, while developing world currencies broadly firmed
against the dollar as investors counted on the U.S. Federal
Reserve's outlook later today to match their expectations of
lowering U.S. borrowing costs.
Following European Central Bank President Mario Draghi's
dovish comments on Tuesday which dented the euro and boosted
emerging market carry trades' allure, developing world investors
are now keen to see how dovish the Fed will be. Markets have
largely priced in a U.S. rate cut in July.
Sentiment was also aided by U.S. President Donald Trump on
Tuesday saying he would meet Chinese President Xi Jinping at the
G20 summit later this month. There is broad scepticism, however,
among investors as to whether the two world leaders can plaster
over the deep fissures in their countries' trade ties.
"The Fed's really going to have to stress and really define
the words 'patience' and 'caution' as markets are very on edge
at the moment and they will take anything that comes out of Fed
officials' mouths as gospel," said Monex Europe FX Analyst Simon
"They have to be very clear and sing from the same hymn
sheet or all it's going to do is increase speculation and market
volatility, making their job even harder."
MSCI's developing world stocks index rose 1.4%,
hitting a more than one-month peak. Stocks in China
gained 1%, while Chinese blue-chips tacked on 1.3% on
optimism of easing U.S.-China tensions and local stimulus.
Hong Kong-traded stocks gained 2.6%. Trade-sensitive
Taiwanese equities added 2%, while their South Korean
peers rose 1.2%.
MSCI's emerging market currencies index
gained 0.3%. China's yuan gained on U.S.-China trade
Russia's rouble firmed, while Moscow-traded stocks
advanced 0.3%, aided by a 0.5% rise in the price of oil
supporting energy stocks.
South Africa's rand strengthened 0.3% while equities
The rand held around 2-1/2-week highs it hit against the
euro on Tuesday, boosted by demand for carry trades which use
the euro as the funding currency.
"While there are so many risks at play in South Africa,
people are still happy to take that carry, regardless," said
Monex Europe's Harvey.
A report said the United States is considering sanctions
that could target Turkish defence firms, cutting them off from
the U.S. financial system over Ankara's purchase of a Russian
defence system, weakening the lira 0.4%.
Tatha Ghose, FX and EM Analyst at Commerzbank, said:
"renewed lira weakness brought back memories of last year's
crisis while the uncertainty surrounding the Istanbul
re-election of 23 June and potential sanctions because of
Turkey's S-400 missile purchases from Russia are all weighing on
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(Reporting by Aaron Saldanha in Bengaluru and Karin Strohecker
in London; Editing by Hugh Lawson)
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