EMERGING MARKETS-EM currencies weaken, stocks plunge as commodity rout deepens

By Purvi Agarwal

Feb 2 (Reuters) - Most emerging market currencies inched lower on Monday, after logging robust gains in the previous week, while assets in some markets came under selling pressure following a sharp plunge in commodity prices.

MSCI's index tracking global EM stocks .MSCIEF slid 2.2%, on track for its steepest one-day decline in more than two months.

South African stocks .JTOPI lost 2.4%, after falling more than 4% in the previous session. The miner-heavy bourse was on track for one of its steepest intraday declines since April, as gold prices tumbled more than 9% after top commodity exchange CME Group raised margin requirements following a collapse in metals prices last week. GOL/

Most heavyweight Asian stocks declined. The index in South Korea .KS11 retreated 5.3% after marking its biggest monthly jump since December 1998 last week, on margin calls triggered by heightened volatility in commodity markets.

DOLLAR RALLY TRIGGERED MELTDOWN IN PRECIOUS METALS

U.S. President Donald Trump nominated former Federal Reserve governor Kevin Warsh as his pick to lead the central bank, a candidate markets expect will stop short of the aggressive monetary policy easing associated with other contenders.

The move supported the U.S. dollar on Friday, and triggered a meltdown in precious metals as markets assessed the Fed's interest rate path under Warsh.

"Risk aversion is gripping financial markets as the gold and silver sell off deepens. The continued selling pressure is a sign of an extremely crowded trade that is unwinding, and it may take time to return to normal," said Kathleen Brooks, research director at XTB.

The sell-off showed in regional equities in emerging Europe as well, with indexes in Hungary .BUX and Poland .WIG20 down 0.6% and 0.4% respectively. Stocks in Romania .BETI shed 1.3%, on track for their third session of losses.

Turkish stocks .XU100 dropped 2.3%, after a more than 22% rise in January, last seen in July 2023.

Indonesian stocks .JKSE closed 4.9% lower after a $80 billion market rout last week that prompted a shake-up at the country's financial regulator. The stock market collapse is the latest sign of trouble in Indonesia's capital markets, which are being left out from a rush to EMs.

INVESTORS POURED MONEY INTO EM IN JANUARY

EM equities rallied last month as global investors poured in money at the fastest clip in years in January, as a weaker dollar and diversification away from the U.S. pointed to an extension of the rally the asset class staged last year.

Most Asian currencies were subdued-to-lower against the dollar. Turkey's lira TRYTOM=D3 was little changed. However, South Africa's rand ZAR= appreciated 0.5% against the greenback in choppy trading.

MSCI's measure of global EM currencies .MIEM00000CUS slipped 0.2%.

Currencies in emerging Europe were subdued against the euro, but Hungary's forint EURHUF= was down 0.4%. Russia's rouble RUB= weakened 0.7% against the greenback, over-the-counter market data showed.

Ukrainian President Volodymyr Zelenskiy said on Sunday a new round of U.S.-brokered trilateral talks between Ukraine and Russia would take place in Abu Dhabi on February 4 and 5.

Credit ratings agency Moody's revised Israel's outlook to "stable" from "negative" on Friday, citing materially reduced exposure to geopolitical risks.

HIGHLIGHTS:

China's factory activity expansion accelerates in January, private PMI shows

Philippine economy to rebound in 2026 with at least 5% growth, says minister

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For CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB