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* Eyes on Fed chief as investors reassess rate cut hopes
* EM stocks set to snap three days of losses
* Mexican peso extends slide after finance minister exits
July 10 (Reuters) - Emerging market currencies were caught in a tight trading range on Wednesday ahead of U.S. Federal Reserve chief Jerome Powell's congressional testimony, which could offer insights on where interest rates are headed.
Moves in emerging markets could be dictated by the tone Powell sets later in the day, building or breaking expectations of the Fed embarking on an easing cycle at a policy meeting this month, hopes of which have supported inflows into risky, developing world assets.
While currencies were tepid, the MSCI index of emerging equities was set to snap a three-day run of losses, helped by gains in Taiwan and Hong Kong.
Chinese stocks dropped despite news that Washington and Beijing officials had held a "constructive" telephone conversation as the two sides try to end a bruising trade war that has weighed on global growth.
"It's not quite clear how EM currencies have priced in rate cuts. If Powell does not change market expectations of a cut in July, the reaction would be relatively small in EM," said Per Hammarlund, chief emerging market strategist at SEB.
"If Powell does move to reduce expectations, EM currencies would weaken temporarily."
Strong U.S. jobs data last week eased expectations of a 50-basis-point rate cut from the Fed in July, but investors have fully priced in a 25-basis-point cut.
Jolting financial markets overnight was the stormy exit of Mexico's finance minister, Carlos Urzua, who cited "extremism" in economic policy. President Andres Manuel Lopez Obrador quickly named well-regarded deputy minister Arturo Herrera to replace him.
The Mexican peso fell 0.24%, adding to its more than 1% slide on Tuesday.
"The reaction was relatively muted, given the risks involved," SEB's Hammarlund said. "Investors are giving AMLO the benefit of the doubt as he has pledged to keep government finances under control."
The Turkish lira extended this week's losses as investors fretted over political interference in Turkey's monetary policy.
The Haberturk news website reported on Wednesday that President Tayyip Erdogan said Turkey could face serious problems if its central bank is not completely overhauled after the dismissal of governor Murat Cetinkaya.
Russia's rouble edged higher as oil prices rose, while South Africa's rand held steady ahead of finance minister Tito Mboweni's budget speech.
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; Editing by Dale Hudson)