March 19, 2019 / 9:33 AM / 3 months ago

EMERGING MARKETS-Emerging market stocks rise, FX firms ahead of Fed meet

* MSCI’s EM stocks index hits 6-1/2 month peak

* Hopes of dovish Fed outlook on Wednesday aid sentiment

* Russian rouble, stocks supported by firmer oil prices

By Aaron Saldanha

March 19 (Reuters) - Emerging market stocks hit a six and a half month peak on Tuesday and developing world currencies firmed against a soft dollar on expectations the U.S. Federal Reserve will strike a dovish stance at its meeting this week.

The two-day meeting starts later on Tuesday. Money markets are pricing in a 99 percent probability of borrowing costs not being altered on Wednesday. They were left unchanged at the Fed’s last rate-setting meeting in January.

Dovishness from the European Central Bank (ECB) and the Fed is spurring emerging market sentiment as developing world central banks have become less worried about accelerating inflation, Vladimir Miklashevsky, senior economist and trading desk strategist at Danske Bank, wrote in a note to clients.

“Given the recent change in monetary path from the ECB and Fed and the intensifying hunt for higher yields, we became slightly more bullish on emerging market FX,” he said.

MSCI’s index of developing world stocks rose 0.2 percent, gaining for a third straight day, while MSCI’S emerging market currencies index ticked up 0.1 percent.

Russian equities were pushed up 0.2 percent, mainly on a strong showing by energy stocks on rising oil prices . The rouble firmed 0.2 percent.

The Russian central bank is due to take a decision on borrowing costs on Friday, with markets pricing in a 87 percent chance of rates remaining at 7.75 percent, according to Refinitiv Eikon data.

The rouble has been a stand-out emerging market performer with a 8.6 percent rise this year, helped by oil prices jumping about 26 percent since the start of 2019.

Turkey’s lira was on an even keel, while stocks slipped away from a more than two week closing high notched on Monday as losses among financials and industrials sent the index 0.1 percent lower.

South Africa’s rand was 0.3 percent firmer as it largely recovered ground lost in the previous session. Local stocks rose 0.4 percent, a gain which set them on track for their highest closing level in nearly half a year.

In emerging Europe, Budapest-traded shares hit a record high and were trading 0.7 percent higher on strength among industrials.

Poland’s zloty was little changed against the euro. Data showed wages in the country’s corporate sector rose by an annual 7.6 percent in February, above analysts’ expectations of 7.2 percent.

For TOP NEWS across emerging markets

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Aaron Saldanha in Bengaluru; Editing by Alison Williams)

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