February 20, 2017 / 10:21 AM / 6 months ago

EMERGING MARKETS-Turkish lira, Mongolian bonds lead emerging market gains

LONDON, Feb 20 (Reuters) - Turkey's lira hit the strongest level in more than six weeks against the dollar and Mongolian bonds soared after a $5.5 billion IMF-led bailout for the country, outperforming broader emerging markets.

MSCI's emerging index rose 0.2 percent, but struggled to get close to 1-1/2 year highs hit last week after Friday's 0.7 percent fall.

Meanwhile, stronger commodity prices and investors seeking higher rewards lifted some currencies as investors prepared for speeches by U.S. Federal Reserve policymakers that could provide further clues on the future path of interest rates.

Speculation the Fed could hike as soon as March has generally underpinned the dollar and pressured some emerging currencies, though Monday trading was muted with U.S. markets closed for Presidents Day.

Turkey's lira strengthened 0.3 percent in its second day of gains, shrugging off data showing consumer confidence declining in February, though the gains later faded.

"Two things are supporting emerging market currencies: One is the yield and the other is volatility, and - as long as volatility remains low and yields remain high - the carry trade continues and this attracts flows into lira, rouble and other high yielders," said Cristian Maggio at TD Securities.

Higher oil prices and ratings agency Moody's updating its outlook on Moscow's sovereign rating to 'stable' from 'negative' propelled Russia's rouble 0.6 percent higher against the dollar.

"It signals that the acute phase of the Russian crisis is over and none of the agencies expect further deterioration on the macro and creditworthiness front," Maggio added.

But South Africa's rand slipped 0.6 percent to its weakest level in nearly a week, with investors nervous before Finance Minister Pravin Gordhan's budget speech on Wednesday amid renewed talk of a cabinet reshuffle.

Gordhan may target taxes on income, alcohol and tobacco in the budget to reassure rating agencies that he will gradually rein in the deficit, a Reuters poll found.

Asian currencies were mostly weaker, with the Philippine peso hitting its lowest in more than a decade after crashing through the psychologically key 50-per-dollar level

Thailand's baht also slipped after data showed the economy expanded less than expected in the last quarter of 2016, indicating recovery will remain slow.

Meanwhile, Mongolian dollar bonds rose across the curve after the country staved off default risk, clinching a $5.5 billion loan package with the International Monetary Fund, the World Bank, Beijing and other lenders.

Across emerging Europe, Serbia's dinar firmed 0.15 percent after Prime Minister Aleksandar Vucic agreed to be the presidential candidate of his centre-right Serbian Progressive Party (SNS) in an election tentatively slated for April.

A victory for Vucic could mean a quicker move to EU accession by the Balkan country.

For GRAPHIC on emerging market FX performance 2017, see tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see tmsnrt.rs/2dZbdP5

Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley Emrg Mkt Indx 941.53 +2.50 +0.27 +9.19

Czech Rep 973.99 +3.98 +0.41 +5.68

Poland 2194.57 +6.27 +0.29 +12.66

Hungary 33894.35 +65.49 +0.19 +5.91

Romania 7774.16 +28.77 +0.37 +9.73

Greece 645.41 +5.95 +0.93 +0.27

Russia 1149.81 -2.40 -0.21 -0.22

South Africa 45571.75 +497.12 +1.10 +3.80

Turkey 88815.64 -14.76 -0.02 +13.66

China 3241.46 +39.38 +1.23 +4.44

India 28595.26 +126.51 +0.44 +7.39

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2017

Czech Rep 27.01 27.01 -0.01 -0.02

Poland 4.32 4.33 +0.13 +1.87

Hungary 308.16 308.15 -0.00 +0.21

Romania 4.52 4.52 -0.01 +0.28

Serbia 123.77 123.95 +0.15 -0.34

Russia 57.96 58.43 +0.82 +5.71

Kazakhstan 318.89 318.55 -0.11 +4.63

Ukraine 26.98 27.02 +0.15 +0.07

South Africa 13.14 13.06 -0.61 +4.50

Kenya 103.45 103.50 +0.05 -1.04

Israel 3.71 3.70 -0.09 +3.92

Turkey 3.63 3.63 -0.10 -2.89

China 6.88 6.86 -0.20 +0.95

India 66.96 67.06 +0.15 +1.47

Brazil 3.10 3.10 +0.00 +4.82

Mexico 20.52 20.43 -0.45 +0.97

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 340 1 .01 7 58.59 1

All data taken from Reuters at 09:52 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see) (Additional reporting by Sujata Rao; Editing by Tom Heneghan)

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