LONDON, July 31 (Reuters) - Emerging stocks headed on Monday for the seventh straight month of gains, though rising political risks hurt asset prices in several key emerging economies, including Russia, Poland and Venezuela.
The dollar steadied near 13-month lows but MSCI's emerging equity benchmark rose 0.3 percent, back towards recent three-year highs, taking its cue from firmer world stock markets . The index is up 24 percent year-to-date..
Global markets, including in Asia, did not show much reaction to North Korea's test of an intercontinental ballistic missile (ICBM) that it said proved its ability to strike America's mainland.
However, Russian stocks retreated 0.6 percent and, though they are set to end July higher after two lossmaking months, the market is under pressure from a diplomatic row with the United States as President Vladimir Putin has ordered 755 U.S. diplomatic stuff to leave Moscow.
The rouble slipped one percent to nearly three-week lows against the dollar and is set for a second month of loss.
ING strategist Dmitry Polevoi said the rouble would also be hurt by the dividend season as foreign investors convert payments into dollars to repatriate.
"Dividends and geopolitics are the dominant themes in the market and are likely to keep the rouble under pressure this week," Polevoi said, though he added that oil prices near two-month highs could "help stabilise portfolio investors' negative sentiment towards Russia".
In nearby Poland, the zloty was flat against the euro , shrugging off legal action by the European Union against Warsaw's controversial judicial overhaul and a warning from Moody's that the reform would be credit negative .
Polish stocks surged almost 1 percent, taking their cue from Western European equities which are underpinned by data showing continued economic recovery.
On bond markets, investors eyes' were on Venezuela where the sovereign 2038 benchmark issue lost almost one cent and bonds from state oil firm PDVSA fell across the curve after a weekend election that is seen as increasing the powers of President Nicolas Maduro and potentially bringing more sanctions from the United States.
A grace period for the Republic of Congo's Eurobond coupon payment expired at the weekend but investors were waiting to see whether the money, frozen by a U.S. court injunction, would be received by close of business on Monday.
The bond was unchanged around 70 cents.
"There was nothing on Friday on the legal side of things to suggest the coupon would be paid. But bondholders think (the freeze) will be lifted over time and they will be paid," said Stuart Culverhouse at Exotix Capital.
"But Congo will sit there with a selective default on their credit rating history."
For GRAPHIC on emerging market FX performance 2017, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see http://tmsnrt.rs/2dZbdP5
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see) (Additional reporting by Andrey Ostroukh in Moscow: Reporting by Sujata Rao; Editing by Gareth Jones)