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EMERGING MARKETS-Currencies bounce as U.S. stimulus hopes dent dollar

* South Africa’s rand surges to over one-week high

* Central bank measures lift lira, rouble

* Turkey stocks gain as manufacturing sector expands

* EM stocks hit highest in more than a week

Oct 1 (Reuters) - Emerging market currencies began the fourth quarter on a strong note on Thursday, with the South African rand firming more than 1% as signs of progress in new U.S. fiscal stimulus measures dulled the dollar’s appeal.

The dollar tumbled to a one-week low, also pressured by robust U.S. data that had investors confident enough about economic recovery prospects to seek out riskier currencies.

MSCI’s index of emerging market FX was up 0.3% after ending September with its smallest increase in four months, although gains were capped by fears of a resurgence in new coronavirus cases across Europe.

“The market appears to be trading data positives and hoping for the best on fiscal and (U.S.) election outcomes, but the warning is that hope over fear should not be confused for hope without fear,” analysts at Mizuho said.

Growing geopolitical risks had also rocked regional currencies last month, with Turkey’s lira slumping to a record low and Russia’s rouble returning to levels last seen in March on fears the countries would get dragged into military conflict in the South Caucasus.

On Thursday, the lira rose 0.1% and the rouble 0.5%, partly due to recent support measures by central banks.

“Geopolitics is capable of containing the Russian market and the rouble, but it seems that previous fears were all exaggerated,” said Andrei Kochetkov, an analyst at Otkritie Brokerage.

The South African rand was up 0.7% after earlier firming as much as 1.3%. Government bonds also firmed, with the yield on the benchmark instrument due in 2030 down 3.5 basis points at 9.41%.

An index of developing world stocks rose 0.5% to its highest in more than a week, tracking gains in Asian bourses.

The Turkish stock index hit a two-month high as data showed the recovery in the manufacturing sector continued in September, with rising orders and output encouraging firms to hire more staff.

Russia’s rouble-based MOEX index was a touch lower with surveys showing domestic manufacturing activity contracted in September after one month of growth, hit by a fall in new orders.

South Africa’s Top 40 index gained 0.5%.

For GRAPHIC on emerging market FX performance in 2020, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see tmsnrt.rs/2OusNdX

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Sagarika Jaisinghani in Bengaluru; additional reporting by Alexander Marrow; Editing by Bernard Orr)

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