May 14, 2015 / 9:42 AM / 2 years ago

EMERGING MARKETS-Rouble weakens as central bank buys dollars, bucks EM trend

LONDON, May 14 (Reuters) - Russia's rouble fell 1.5 percent on Thursday after the central bank intervened to knock it off 5 1/2-month highs, as other emerging market currencies held on to the previous day's gains against a weaker dollar.

Disappointing U.S. data reinforced expectations of U.S. interest rates would not rise soon, leading most emerging market currencies to rally on Wednesday. The dollar's fall to three-month lows overshadowed a renewed rise in German bond yields, despite a knock-on effect on Treasuries.

On Thursday, currencies mostly extended their gains as the dollar fell another 0.3 percent. The Turkish lira reached a one-month high and Asian currencies also gained.

"This is a story of dollar weakness more than emerging market currency strength," said William Jackson at Capital Economics.

However, the rouble fell after rising above 50 per dollar , prompting the central bank to announce it was buying $100 million to $200 million a day to replenish its reserves.

Russian dollar-denominated stocks fell 2.5 percent for their biggest loss in almost four weeks.

"It is clear to us that this decision is motivated by a desire to stabilize the rouble exchange rate at around 50 per dollar," Alfa Bank analyst Nataliya Orlova told clients, adding she saw the policy as negative.

"Even if the interventions are small, we believe that the central bank decision calls into question the inflation- targeting strategy."

Central European currencies were mainly flat against the euro , pressured by higher German yields. Polish and Hungarian yields rose 5-10 basis points while Czech 10-year yields surged to new five-month highs.

Recent economic data across the region has been fairly strong, with Hungary and Romania both posting above-forecast numbers on Wednesday. Czech inflation released this week was also higher than expected.

Stocks across the region weakened, led by a 0.5 percent loss in Warsaw where gas firm PGNiG lost 5 percent after filing for arbitration in a price dispute with Russia's Gazprom.

MSCI's emerging index slipped after adding 0.4 percent in the previous session.

For GRAPHIC on emerging market FX performance 2015, see link.reuters.com/jus35t

For GRAPHIC on MSCI emerging index performance 2015, see link.reuters.com/weh36s

For GRAPHIC on MSCI emerging Europe performance 2015, see link.reuters.com/jun28s

For GRAPHIC on MSCI frontier index performance 2015, see link.reuters.com/zyh97s

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see ) (Additional reporting by Karin Strohecker; Editing by Larry King)

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