LONDON, Oct 2 (Reuters) - Emerging market currencies slipped on Monday, extending losses from last week as a strong dollar and rising U.S. Treasury yields outweighed upbeat factory data from China.
Emerging markets are one of the top-performing asset classes of 2017, with double-digit gains in some sectors, but they have fallen back in recent weeks as the dollar has risen on expectations of a U.S. rate rise by the end of the year and the possible appointment of a more hawkish U.S. Federal Reserve chief.
South Africa's rand, Russia's rouble and Turkey's lira all fell around 0.5 percent against the dollar as the dollar index rose further after enjoying its best week of 2017 last week, and yields on 10-year U.S. Treasuries hit their highest since July.
Emerging currencies hit five-week lows last week on JPMorgan's ELMI Plus index, losing more than 1 percent.
"You're seeing some repricing on the U.S. side on a combination of the possibility of tax reform in the U.S. being approved and maybe a more hawkish Fed governor," said Jakob Christensen, an emerging markets analyst at Danske Bank.
"That is playing into a stronger dollar, and goes hand in hand with higher U.S. rates, which is typically tricky for emerging markets," he said.
Investors were cheered by data showing manufacturing activity in China grew at the fastest pace since 2012 in September since that data paints a rosy picture for demand for emerging market exports.
But with markets in China, South Korea and India closed for public holidays, MSCI's benchmark emerging equity index was little changed, and trading some 3 percent below three-year highs struck in September.
There were gains, however, on emerging European equities, with Warsaw and Budapest rising 0.7 and 0.9 percent respectively , after robust purchasing manager (PMI) surveys.
"On the equity side we have seen a significant rally and maybe the prices are beginning to be a bit stretched, but the strong PMIs suggest the global economy is doing quite well and supporting the trade-oriented emerging markets," Danske Bank's Christensen said.
On bond markets, Abu Dhabi was the latest country to test markets with plans for a triple-tranche U.S. dollar-denominated bond issue.
Demand remains strong for emerging market paper, with the spread of sovereign debt over U.S. Treasuries near its lowest since August 2014. Average yields on emerging currency debt nudged back below 6 percent after rising last week .
JPMorgan analysts said that while headwinds for emerging debt had increased, they remained overweight.
"Given the repricing that has already been seen in market expectations for U.S. rates and emerging currency valuations that are attractive, we are inclined to think the worst of this move is behind us," they told clients.
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg
Morgan Stanley Emrg Mkt Indx 1082.34 +0.62 +0.06 +25.52
Czech Rep 1049.86 +4.69 +0.45 +13.92
Poland 2474.34 +20.88 +0.85 +27.02
Hungary 37652.53 +361.88 +0.97 +17.65
Romania 7898.57 +20.65 +0.26 +11.48
Greece 742.15 -13.46 -1.78 +15.31
Russia 1133.85 -2.90 -0.26 -1.60
South Africa 49661.97 +285.51 +0.58 +13.12
Turkey 03528.51 +620.77 +0.60 +32.49
China 3349.22 +9.57 +0.29 +7.91
India 31283.72 +1.24 +0.00 +17.49
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 25.96 25.97 +0.05 +4.04
Poland 4.31 4.31 -0.05 +2.09
Hungary 311.09 311.54 +0.14 -0.73
Romania 4.59 4.59 +0.09 -1.14
Serbia 119.05 119.10 +0.04 +3.61
Russia 57.84 57.51 -0.58 +5.92
Kazakhstan 341.05 340.28 -0.23 -2.17
Ukraine 26.66 26.60 -0.21 +1.29
South Africa 13.62 13.55 -0.52 +0.84
Kenya 103.10 103.10 -0.00 -0.71
Israel 3.54 3.53 -0.17 +8.81
Turkey 3.58 3.56 -0.40 -1.41
China 6.65 6.65 -0.00 +4.35
India 65.31 65.31 +0.00 +4.04
Brazil 3.16 3.16 -0.08 +2.83
Mexico 18.27 18.25 -0.11 +13.39
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 304 -2 .02 8 03.45 1
All data taken from Reuters at 09:19 GMT. Currency percent change calculated from the daily U.S.
close at 2130 GMT.
Reporting by Alexander Winning and Claire Milhench, editing by Louise Heavens