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EMERGING MARKETS-Belarusian rouble bucks FX rally after credit rating warning

* Belarusian rouble at 2.518 per dollar

* Chinese yuan at three-year high; U.S.-China talks eyed

* MSCI EMFX at new peak; up over 3% from 2021 lows

* Russian stocks retreat from record highs

May 27 (Reuters) - Emerging market currencies extended gains to a fifth straight session on Thursday to notch yet another high, with the Chinese yuan at a three-year peak, although looming sanctions prompted warnings about Belarus’ sovereign credit rating.

Yields on Belarusian bonds continued to rise and the rouble was down 0.7%, set for its biggest drop in seven weeks, as countries re-routed flights to avoid Belarus after the government forced a passenger flight to land there to detain a dissident journalist.

Credit rating agency S&P Global signalled on Tuesday it could downgrade Belarus’ credit rating if Western governments put stronger economic sanctions on the country. It had put a negative outlook on the rating last September after disputed presidential elections caused protests and a government crackdown.

The Chinese yuan, meanwhile, firmed 0.3%, rising for a fifth session running. The currency is up nearly 13% over the last year.

U.S. and China are set to restart trade discussions this week after a long hiatus following the U.S. change of government. The “Phase 1” trade deal signed in January 2020 remains in force, but the Chinese side has repeatedly demanded the rolling back of tariffs enacted during the Trump administration.

“Given (U.S. President Joe) Biden’s vocal opposition to greater tariffs, the outcome is likely either status quo or partial removal,” said a group of analysts at Maybank led by Saktiandi Supaat.

“Risks are thus skewed downside for the USDCNH for these events.”

MSCI’s index of emerging market currencies rose 0.2% to a new high. The index has gained more than 3% since hitting this year’s low in March, thanks to major central banks adopting easy monetary policies as the global economy attempts to revive itself from a slump caused by the coronavirus pandemic.

The dollar traded steady, not far from recent lows, with focus now on upcoming U.S. data to gauge inflationary pressures. U.S. personal consumption report is due on Friday while gross domestic product and jobless claims numbers are expected later in the day.

Turkey’s lira and Russia’s rouble shrugged off initial sluggishness to rise around 0.2% each, while in South Africa the rand continued its winning streak to day six, scaling February 2019 highs.

Emerging markets stocks were flat with mainland China stocks closing at their highest in three months, while Russia’s MOEX dipped 0.2% after hitting record highs last session.

For GRAPHIC on emerging market FX performance in 2021, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see tmsnrt.rs/2OusNdX

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For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru; Editing by Hugh Lawson)

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