* Stocks set for best day in over two months
* Hungarian forint surges on positive GDP, hawkish signals
* Russian stocks rally, rouble flat
By Ambar Warrick
May 18 (Reuters) - Emerging market stocks and currencies
rose on Tuesday after comments from the Federal Reserve
downplayed the possibility of early policy tightening, while a
jump in commodity prices saw the South African rand leading
gains.
MSCI's index of EM stocks surged 1.5% and was set
for its best day in more than two weeks as bourses in Asia
bounced back from recent losses.
The index of EM currencies rose 0.3% after
Dallas Federal Reserve President Robert Kaplan reiterated his
view that he does not expect interest rates to rise until next
year, prompting a drop in the dollar and Treasury yields, while
benefiting risk-driven assets.
"High inflation or inflation expectations and an unchanged
Fed approach are an unfavourable constellation for USD," You-Na
Park-Heger, FX and EM analyst at Commerzbank wrote in a note.
"An increasing number of central banks seem to be waking up
from their pandemic paralysis and are reacting to the improving
economic situation and rising inflation."
Gains in gold, oil and base metal prices pushed the South
African rand up 0.6%, the most across currencies in Europe, the
Middle East, and Africa (EMEA).
The currency is among the best performing EM units this year
because of its relatively high yield.
Hungary's forint rose 0.3% to a near nine-month
high against the euro, extending steep gains from Monday after
the country's central bank flagged a possible rate hike in June
to tame inflation.
Data also showed Hungary's economy shrank less than expected
in the first quarter.
Hawkish signals from Hungary, following nearly a year of
loose monetary policy, pushed up inflation expectations around
the globe, with several EM banks beginning to either commence
tightening, or signalling that they will.
The prospect of tightening, coupled with a largely benign
Fed, has seen EM bond spreads stabilise back to near
pre-pandemic levels, pointing to a stronger outlook for EM debt.
Russia's rouble was flat, as gains in oil prices were
offset by preliminary data that showed gross domestic product
fell 1% in the first quarter.
But Russian stocks rallied 1.3% to near record
highs, propped up by strong first-quarter results from Gazprom
Neft, the oil arm of Russian gas giant Gazprom
. Both stocks rose about 1%.
For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh
For GRAPHIC on MSCI emerging index performance in 2021, see https://tmsnrt.rs/2OusNdX
For TOP NEWS across emerging markets
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see
(Reporting by Ambar Warrick in Bengaluru; editing by Barbara
Lewis)