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

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:

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