EMERGING MARKETS-EM stocks gain for eight straight session on Fed-fueled optimism

By Pranav Kashyap and Twesha Dikshit

(Reuters) - Most emerging market assets rose on Tuesday as investors bet the Fed will restart its easing cycle and flag more cuts in Wednesday's decision, fuelling a measured rush into risk.

An index tracking emerging market stocks .MSCIEF rose 0.7%, and was set for its longest daily run in over a year, while a similar gauge for currencies .MIEM00000CUS ticked up 0.2%.

In Asia, China's yuan CNH= edged up 0.1% with stock indexes mixed after a recent rally.

U.S. and Chinese officials said they had reached a framework agreement on TikTok that would allow a switch to U.S.-controlled ownership, with President Donald Trump and Chinese President Xi Jinping to speak on Friday.

A rapidly cooling U.S. labour market has supercharged bets for Fed rate cuts, dragging down the greenback and rekindling investor appetite for emerging market currencies.

While a 25 basis point cut on Wednesday is fully baked in, traders will be on the look-out for the Fed's "dot plot" projections and hints about further easing from Chair Jerome Powell.

"Tomorrow will not be a surprise, but it's suspense over what could come in the final two meetings this year and the speed of return to neutral next year that is pre-occupying investors," said Kenneth Broux, head of corporate research, FX and Rates at Societe Generale.

With the dollar's weakness potentially reviving its role as a funding currency for carry trades, analysts note the hunt for higher yields is back on. The Hungarian forint HUF= has risen nearly 17% against the dollar this year, backed by one of the highest interest rates in Europe.

Hungary's central bank remains laser-focused on stabilizing the currency through elevated borrowing costs—keeping the forint in favour.

Meanwhile, headline inflation in the Czech Republic rose 4.2% in August, as expected, reinforcing the central bank's hawkish stance. Stocks in Prague .PX slipped 0.3%.

The koruna CZW= ticked up 0.3% on the day, and has climbed 15% against the dollar this year, buoyed by elevated interest rates. With wage growth rising and inflation risks lingering, analysts expect the Czech National Bank to hold rates steady at its Sept. 24 meeting. One more in 2025 is still on the table.

The Indian rupee INR= held its ground while Mumbai's equity markets .NSEI, .BSESN rose 0.5%, as New Delhi and Washington entered into key trade talks.

Investor hopes are pinned on a breakthrough, weeks after President Donald Trump imposed punitive tariffs on India over its Russian oil purchases. That sent the rupee to record lows, rattled investor sentiment, and sparked concerns over India's growth outlook.

Elsewhere, Tel Aviv's benchmark index .TA125 dropped 0.8% for the fifth straight session, with Qatar and U.S. nearing a defence deal following Israel's attack in Doha that was met with widespread condemnation.

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