EMERGING MARKETS-EM FX, stocks pause after rally as markets digest Fed comments

By Purvi Agarwal

Jan 29 (Reuters) - Most emerging market currencies and stocks steadied on Thursday, after a streak of robust gains, while investors assessed the Federal Reserve's broadly positive view of the U.S. economy.

MSCI's index tracking global emerging market currencies .MIEM00000CUS was down 0.2% on the day, with most Asian currencies slipping against the dollar. The index is set to snap a five-session gaining streak, during which it rose over 1%.

The Fed kept rates on hold as expected on Wednesday, with Chair Jerome Powell describing a solid economy and diminished risks to both inflation and employment, which could signal a lengthy wait before any further cuts in borrowing costs.

Powell's positive comments and Treasury Secretary Scott Bessent denying U.S. intervention in currency markets provided some support to the dollar index =USD.

"Existing macro headwinds including global central bank diversification away from the dollar, widening fiscal deficits, questions around Fed independence, and expectations for ongoing policy easing have kept downside pressure elevated," said Adam Turnquist, chief technical strategist for LPL Financial.

South Africa's rand ZAR= was subdued against the greenback. Stocks .JTOPI climbed 1% on a boost from miners as gold prices set record highs.

Turkey's lira TRYTOM=D3 was marginally lower against the dollar, while Russia's rouble RUB= rose 0.7%, over-the-counter market data showed.

Currencies in emerging Europe were largely muted against the euro, but the Hungarian forint EURHUF= weakened about 0.6%.

Stocks in emerging markets have rallied to record highs as investors diversified out of U.S. stocks and the frenzy around AI-linked and commodity-heavy equities helped lift appetite.

MSCI's measure of EM stocks .MSCIEF was off 0.1% on Thursday. Some Asian markets pulled back, but declines were capped by broader gains.

Philippine stocks .PSI fell 2.1%. Data showed that the country's economic growth slumped to its weakest in almost five years in the final quarter of 2025.

Indonesian stocks fell as much as 10% after Goldman Sachs and UBS lowered their ratings, a day after MSCI flagged investability risks.

Authorities scrambled to stop a flight of capital from Indonesia's stock market with measures to counter the risk of a downgrade to frontier market status. The index closed 1.1% lower.

Korea's KOSPI .KS11 closed at a record high on a boost from Hyundai Motor and SK Hynix.

Polish stocks .WIG20 jumped 1%, while Romania .BETI and Hungary .BUX were both up about 0.1%.

Turkey's main banking index .XBANK jumped 4.3% to a record high after ratings agency Fitch revised the outlooks of four major lenders to positive.

Data showed the unemployment rate in Turkey dropped to 7.7% in December.

HIGHLIGHTS:

India economy to grow 6.8%-7.2% in 2026-27, government forecasts

China reportedly drops rules that sparked property crisis, developer shares surge

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For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB