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EMERGING MARKETS-Currencies weakens as Fed plays down chances of rate cut

Sruthi Shankar

* Dollar's recovery hurts emerging currencies

* Czech crown weakens ahead of central bank meeting

June 26 (Reuters) - Emerging-market currencies fell on Wednesday after U.S. Federal Reserve officials tamped down hopes of aggressive interest-rate cuts, while uncertainty before U.S. and Chinese leaders meet drove stocks lower for a fourth straight day.

Developing-world markets have rallied this month as major central banks signalled they would loosen monetary policy to combat a global economic slowdown. But on Tuesday St. Louis Federal Reserve President James Bullard said a 50-basis-point U.S. rate cut next month "would be overdone."

His comments helped the U.S. dollar gain while most Asian currencies weakened, including China's onshore yuan, the Indian rupee and the Indonesian rupiah.

"Comments from dovish FOMC member Bullard not in support for a 50bp cut in July forced a re-think of market expectations from the FOMC meeting," Citi analyst Johanna Chua wrote in a note. "Risk assets broadly reacted negatively with equities lower and USD stronger."

The Thai Baht took back some of its early losses after the central bank left rates unchanged for a fourth straight meeting, as expected.

However, Russia's rouble gained as an outage at a refinery on the U.S. East Coast and a decline in U.S. crude stockpiles pushed up the price of oil, the country's top export. The Turkish lira also strengthened.

Emerging-market stocks were hit by weakness in Chinese shares before a meeting between U.S. President Donald Trump and Chinese President Xi Jinping at the G20 Summit on Saturday.

Although hopes are the two sides will revive trade talks, Washington will not accept any conditions around the U.S. use of tariffs, a senior administration official said on Tuesday.

Indian stocks NSEI> gained as U.S. Secretary of State Mike Pompeo met in New Delhi with Indian leaders amid tense trade relation between the two countries.

Just before his arrival, New Delhi imposed tariffs on some U.S. goods after the U.S. administration expelled India from a group of countries that were allowed duty-free access for some products to the U.S. market.

On Tuesday, the index provider MSCI Inc said it would Kuwaiti equities to its main emerging-markets index next year. The Kuwaiti market has outperformed its Middle East peers this year in anticipation of the move; its benchmark index is up about 21% so far this year.

In East Europe, the Czech crown weakened before a Czech central bank meeting on Wednesday that's expected to leave interest rates unchanged. A Reuters poll showed that all 14 analysts surveyed forecast the main, two-week repo rate would remain 2.00%.

The main Prague SE stock index fell to its lowest in nearly a month low, dragged down by banking shares.

For GRAPHIC on emerging market FX performance 2019, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance 2019, see https://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 Sruthi Shankar in Bengaluru)