LONDON, June 29 (Reuters) - The dollar's fall to near nine-month lows and a Wall Street rally boosted emerging stocks 0.5 percent on Thursday after two days of losses, though central European bond markets stayed fragile with an eye on German yields.
Recent hawkish talk from Western central banks has driven German short-term yields to the highest in a year and the euro to a one-year high - but emerging markets have been relatively sanguine thanks to a better growth and current account picture at home as well as a relatively subdued U.S. yield picture.
"Markets have been able to swallow this in a better way than in the past," said Danske Bank analyst Jakob Christensen, noting stronger global economic growth.
"In the euro zone, there is quite a strong economic momentum that is helping risk sentiment in general and, with that, emerging markets."
A financials-led rally on Wall Street allowed emerging equities also to rebound. Hong Kong rose 1 percent, led by a 4 percent jump in HSBC and a 2 percent gain on the financials index.
Hong Kong's main bourse shrugged off fresh falls in its small-cap market, which hit a new record closing low.
Emerging currencies also mostly firmed against the dollar, with China's yuan touching a seven-month high. The rouble also rose 0.3 percent, buoyed by oil prices firming for the sixth straight day.
Euro-crosses in central Europe, however, were under pressure, with the Polish zloty and Hungarian forint both slipping 0.3 percent against the single currency and bond yields staying elevated.
Polish 10-year yields touched new five-week highs , up almost 20 basis points this week, while Hungarian yields are at three-week highs.
"There will be spillover from higher yields in the euro area to these economies. We do see that the very strong economic growth picture there is also prompting higher yields, given that inflation will be on the rise eventually," Christensen said.
But ING Bank analysts played down the risk to the region after an initial adjustment to higher Bund yields.
"To the extent to which the rise in Bund yields is gradual, and the ECB avoids a U.S. 'taper-tantrum'-like bond sell-off, then short-term downside risk to central European currencies versus the euro via the bond sell-off channel should be limited and short-lived," they told clients.
The Czech crown was flat before a central bank rate decision that is expected to keep policy unchanged but could signal the timing of its first rate rise.
Many Gulf markets remained shut for Eid but the Qatari riyal appeared to have stabilised around the official 3.64 per dollar peg after a large fall in thin liquidity earlier this week . The currency has also firmed in forward markets, back towards the peg level.
However, Qatari debt insurance costs rose to a 16-month high of 120 basis points, according to IHS Markit data.
For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml
For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
Morgan Stanley Emrg Mkt Indx 1017.31 +5.21 +0.51 +17.98
Czech Rep 983.41 +6.19 +0.63 +6.71
Poland 2339.40 +11.72 +0.50 +20.10
Hungary 35588.09 +132.12 +0.37 +11.20
Romania 8149.01 -19.36 -0.24 +15.02
Greece 821.49 -1.13 -0.14 +27.63
Russia 1011.98 +9.15 +0.91 -12.18
South Africa 45679.90 +175.35 +0.39 +4.05
Turkey 00773.20 +155.51 +0.15 +28.97
China 3187.90 +14.70 +0.46 +2.71
India 30883.43 +49.11 +0.16 +15.99
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 26.30 26.28 -0.07 +2.68
Poland 4.24 4.23 -0.22 +3.91
Hungary 309.98 309.00 -0.32 -0.37
Romania 4.55 4.55 +0.01 -0.26
Serbia 120.75 120.90 +0.12 +2.15
Russia 59.03 59.22 +0.33 +3.79
Kazakhstan 321.73 324.08 +0.73 +3.70
Ukraine 26.06 26.07 +0.04 +3.61
South Africa 12.95 12.92 -0.23 +6.03
Kenya 103.58 103.60 +0.02 -1.17
Israel 3.50 3.50 +0.14 +10.10
Turkey 3.51 3.51 +0.08 +0.50
China 6.78 6.80 +0.29 +2.42
India 64.53 64.50 -0.05 +5.29
Brazil 3.28 3.28 -0.03 -0.83
Mexico 17.86 17.85 -0.09 +15.98
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 325 -1 .04 7 88.01 1
Additional reporting by Claire Milhench