Asian stocks support EM equities
KOSPI crosses 3,000 mark on post-election rally
Lira weakens further, analysts see rate cuts coming
By Sruthi Shankar
June 20 (Reuters) - A semblance of calm returned to most emerging markets on Friday, as worries about an immediate U.S. involvement in the Iran-Israel conflict eased, in turn putting pressure on the dollar and oil.
The MSCI index of EM equities .MSCIEF climbed 1.1%, supported by heavyweight Asian bourses including South Korea's Kospi .KS11 that rose above 3,000 points for the first time in 3-1/2 years.
Stock markets in Hungary .BUX Turkey .XU100, Hong Kong .HSI, India .BSESN rose in the range of 0.8% and 1.3% after the White House said that President Donald Trump would make a decision on whether the U.S. would get involved in the Middle East conflict in the next two weeks, raising pressure on Tehran to come to the negotiating table.
The Israel-Iran attacks, which entered a second week, have supported the dollar's safe-haven appeal and lifted crude prices in recent days, weighing on EM currencies, particularly those of crude importers such as India and Turkey.
As crude prices LCOc1 eased 2.2% on Friday, the rupee INR= firmed after hitting a three-month low against the dollar on Thursday.
The Turkish lira TRYTOM=D3, however, eased to 39.7 per dollar, also a three-month low, after the central bank held its key interest rate steady at 46% on Thursday but said inflation should continue to decline and growth should slow.
"Turkey's central bank kept rates unchanged, but made subtle changes to its language and communication, which suggest that the central bank will resume cutting interest rates sooner rather than later," Commerzbank strategist Tatha Ghose said.
The Thai baht THB= was hit by a political storm after Prime Minister Paetongtarn Shinawatra faced the prospect of losing her government's majority as a vital coalition partner looked set to demand her resignation after just 10 months in power.
The baht weakened for a fifth consecutive session, trading at 32.78 per dollar.
A gauge of EM currencies .MIEM00000CUS hit a record high earlier this month and its stocks counterpart .MSCIEF touched over three-year highs as broad dollar weakness and optimism about U.S. trade deals helped sentiment.
EM local currency bond funds enjoyed record inflows in the past week as Chinese local funds pulled in more money, Barclays said in a report, citing EPFR data. EM equities fund inflows were at a three-month high, it said.
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For RUSSIAN market report, see RU/RUB
(Reporting by Sruthi Shankar in Bengaluru; Editing by Alison Williams)
((sruthi.shankar@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6182 2787;))
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