LONDON, May 11 (Reuters) - Caught between rising oil prices and a perky dollar, emerging markets ended a rollercoaster week looking mixed, with stocks clocking up their strongest week for three months while currencies in Argentina and Turkey were still suffering.
MSCI’s emerging markets benchmark gained 0.7 percent on the day and was on track for a 2.6-percent rise over the week in its best such performance since February.
The index was boosted by heavyweight Hong Kong, where stocks rose more than 1 percent to hit their highest since March, and are on track for a near-4 percent jump on the week.
Meanwhile, shares in mainland China posted their strongest weekly performance for almost three months, as interest towards Chinese blue-chips has been steadily building ahead of MSCI’s A-share inclusion next month.
Following a recent shakeout rippling through global markets, the mood was buoyed by Thursday’s soft U.S. inflation numbers following last week’s job data, both of which pointed to sluggish wage growth and easing upward pressure on price increases and the possible trajectory of U.S. interest rates.
Adding to the upbeat mood across Asian stock markets was a further easing in tensions on the Korean Peninsula after U.S. President Donald Trump said he would meet North Korean leader Kim Jong Un in Singapore on June 12.
Oil prices still hovered close to multi-year highs hit this week on a looming drop in Iranian exports after Washington pulled out of the Iran nuclear deal and said it would re-introduce sanctions.
But the dollar grinding higher and on track for a fourth straight week of gains exerted some pressure.
Cracks were showing in emerging markets Bank of America Merrill Lynch analysts wrote in their weekly note on portfolio flows, noting emerging market equities and debt had seen, at $3.7 billion, their largest weekly outflows since December 2016.
“Higher rates, oil, U.S. dollar equals tighter financial conditions equals deleveraging equals emerging markets outflows,” the note said.
Well-established hotspots were still in focus among emerging market currencies. Turkey’s lira weakened 0.6 percent on the day and is on track for a slightly bigger fall since Monday in its second straight week of losses.
Assurances from one of Turkish President Tayyip Erdogan’s top economic advisers that the central bank was doing what is necessary on monetary policy and nobody need worry about any future steps it will take did little to calm investors’ concern about stubbornly high inflation and central bank independence.
Argentina’s peso is on track to weaken nearly 4 percent in its third week in the red, with markets taking little solace from International Monetary Fund chief Christine Lagarde saying discussions with Buenos Aires on a programme will continue with the aim of reaching a swift conclusion.
Malaysia’s ringgit, still smarting from the election upset that swept 92-year old strong man Mahathir Mohamad into power, is on track for a sixth straight week of losses with non-deliverable currency forwards indicating further weakness ahead.
However, there was some cheer elsewhere, with both Russia’s rouble and South Africa’s rand on track to snap multi-week losing streaks and strengthen more than 1 percent over the week thanks to the recent rise in oil and commodity prices.
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Reporting and graphic by Karin Strohecker Editing by Louise Ireland