By Claire Milhench
LONDON, Aug 21 (Reuters) - Emerging stocks rose to one-week highs on Tuesday after U.S. President Donald Trump criticised the Federal Reserve for raising interest rates, clobbering the dollar and U.S. Treasury yields, while the lira and rouble continued to fall.
MSCI's benchmark emerging equities index .MSCIEF rose 1 percent and was set for a third day of gains after Trump said he was "not thrilled" with the Federal Reserve for raising rates under chairman Jerome Powell. comments caused the dollar index .DXY to retreat 0.35 percent to a near two-week low, while U.S. 10-year Treasury yields US10YT=RR fell towards a six-week low.
That helped emerging stocks and some currencies make gains, although the Turkish lira and Russian rouble remained under pressure as investors eyed threats stemming from their deteriorating relations with the United States.
Chinese mainland shares .CSI300 jumped 1.8 percent, South Korea .KS11 1 percent and Indonesia .JKSE 0.9 percent, while in Europe, Turkish stocks .XU100 rose 1.6 percent and Polish shares 0.8 .WIG20 percent.
The biggest currency gainers included South Africa's rand ZAR=D3 , up 0.9 percent, while China's yuan CNY= firmed 0.2 percent to a near two-week high despite Trump's comments that China was manipulating its currency to offset U.S. tariffs. U.S. tariffs on $16 billion of Chinese goods take effect at 0401 GMT on Thursday, along with retaliatory tariffs from Beijing on an equal amount of U.S. goods.
The impact of Trump's comments on U.S. monetary policy outweighed him saying that he was not anticipating much from this week's trade talks between the United States and China. Investors are hoping that the discussions will go some way towards resolving the damaging dispute. lira TRY= weakened around 0.6 percent after Trump ruled out agreeing to any demands from Turkey to gain the release of the detained American pastor Andrew Brunson. a threat the U.S. will impose tighter sanctions in retaliation for Brunson and there's little sign either government is trying to mend relations," said William Jackson, senior emerging economist at Capital Economics.
"Both seem to be standing their ground, and given Turkey's dependence on capital inflows to fund the current account deficit, it is very vulnerable to any shocks that might tighten external financing conditions."
Russia's rouble RUB= also dipped 0.4 percent as investors eyed the growing sanctions risk. Microsoft (NASDAQ: MSFT ) said on Monday that it had thwarted hackers associated with the Russian government who were trying to target the websites of two right-wing U.S. think-tanks. L2N1VC040
Britain will also call on the European Union today to increase sanctions against Russia, as new U.S. sanctions in relation to the poisoning of a former Russian spy in Britain take effect from Wednesday. Russia has denied any involvement in the poisoning. forint EURHUF= firmed 0.2 percent against the euro ahead of a central bank meeting today at which rates are expected to stay on hold. has picked up along with forint volatility in the wake of Turkey's currency crisis, but Jackson said he was not expecting the bank to shift its tone until its September meeting.
Overnight, Venezuela slashed five zeros from prices as part of a broad economic plan to tame hyperinflation that economists say is likely to escalate the crisis. sovereign dollar bonds fell across the curve with the 2028 issue VE036133678= down 1 cent to 24.55 cents in the dollar according to Thomson Reuters data.
For GRAPHIC on emerging market FX performance 2018, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2018, see http://tmsnrt.rs/2dZbdP5
For TOP NEWS across emerging markets CENTRAL EUROPE market report, see CEE/
For TURKISH market report, see .IS
For RUSSIAN market report, see RU/RUB )
Emerging Markets Prices from Reuters
Net Chg % Chg % Chg
Morgan Stanley (NYSE: MS )
Emrg Mkt Indx .MSCIEF 1044.19 +10.54 +1.02 -9.86
+1.55 +0.15 -1.36
2258.29 +22.21 +0.99 -8.24
36469.31 +32.35 +0.09 -7.38
-3.46 -0.04 +6.16
+5.12 +0.72 -10.55
-4.97 -0.47 -8.15
.JTOPI 51174.32 +72.79 +0.14 -2.59
.XU100 90185.99 +1451.23 +1.64 -21.80
2733.83 +35.36 +1.31 -17.34
.BSESN 38314.01 +35.26 +0.09 +12.50
close currency currency
% change % change
66.96 -0.40 -14.23
South Africa ZAR=
14.52 +0.99 -14.07
6.08 -0.65 -38.08
3.97 +0.04 -16.52
Index Strip Spd Chg %Rtn Index
Sov'gn Debt 11EML EMBIG 392
.02 7 69.36 1
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