EMERGING MARKETS-EM FX, stocks rally to record high ahead of Fed decision; Indonesia slumps

MSCI EM FX, stocks hit record high Indonesia stocks slide after MSCI flags investability risk IMF approves final review of Zambia’s credit facility Moody’s upgrades rating on Kenya By Purvi Agarwal (Reuters) - Most emerging market currencies and stocks continued to gain on Wednesday, with the dollar stable ahead of the U.S. Federal Reserve’s monetary policy decision, while Indonesian stocks plunged after MSCI flagged investability risks. MSCI’s index tracking global EM currencies (.MIEM00000CUS) was up 0.3%, touching a record high. The greenback (=USD) fell to a four-year low. President Donald Trump brushed off the currency’s decline, saying its value was “great”, but steadied in the session, up 0.2%. The Federal Reserve’s decision is due at 2 p.m. ET. Though markets expect the central bank to remain on hold, commentary from policymakers on the rate path outlook could set the tone for the currency market this week. “Trade and geopolitical uncertainty, tied to an increasingly unreliable American friend and ally, as well as growing concerns about what will happen to the Fed’s credibility once Jerome Powell leaves office (it will fly out of the window), continue to weigh on the US dollar,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. Elsewhere in EMs, index provider MSCI said it had concerns about ownership and trading transparency in Indonesia and the market risked a downgrade to frontier status if the issues were not resolved. Indonesian stocks (.JKSE) plunged as much as 8.8% in the session, triggering a trading halt, and closed 7.4% lower for the day. Still, MSCI’s index tracking EM stocks (.MSCIEF) surged 1.7% to another record high, with Asian equities leading the rally as investors flock back to AI-linked stocks. SK Hynix (000660.KS) jumped 5.1% after booking a quarterly profit that more than doubled to a record, also lifting the South Korean stock index (.KS11) 1.7%. Optimism around AI showed in other tech-heavy indexes with ones in Hong Kong (.HSI) and Taiwan (.TWII) up 2.6% and 1.5% respectively. Regional equities in emerging Europe also gained, with ones in Romania (.BETI) advancing 1.6% and Hungary (.BUX) up 0.4%. Turkish stocks (.XU100) surged 1.8% while ones in South Africa (.JTOPI) climbed 1.1% after gold prices rallied past $5,300/oz. On the FX side, most emerging Europe currencies were muted against the euro and Turkey’s lira (TRYTOM=D3) was little changed against the dollar. South Africa’s rand (ZAR=) was down 0.3%. The International Monetary Fund on Tuesday approved the sixth and final review of Zambia’s extended credit facility, paving the way for a disbursement of $190 million. Credit ratings agency Moody’s on Tuesday upgraded Kenya’s long-term foreign currency sovereign credit rating to “B3” from “Caa1”, saying the country’s near-term risk of default has eased. HIGHLIGHTS: Sri Lanka central bank holds policy rate steady as IMF review looms Thai economy could grow up to 1.7% this year, still below potential, central bank chief says Vanke bonds, stocks rally after Shenzhen Metro pledges loan support For TOP NEWS across emerging markets For CENTRAL EUROPE market report, see (CEE/) For TURKISH market report, see (.IS) For RUSSIAN market report, see (RU/RUB)