November 7, 2019 / 9:58 AM / 14 days ago

EMERGING MARKETS-Trade-exposed Asia FX gains as China suggests rollback in tariffs

* Yuan strengthens past 7 per dollar on trade optimism

* China, U.S., agreed to remove existing tariffs in phase

* Turkey's lira gains as Erdogan-Trump meet confirmed

By Sruthi Shankar

Nov 7 (Reuters) - Trade-sensitive Asian currencies gained on Thursday after China said Beijing and Washington have agreed to remove additional tariffs imposed during their trade dispute.

The Korean won jumped 0.6% to trade near four-month highs. The Chinese yuan strengthened about 0.4% to trade at 6.98 per dollar in offshore trading.

South Africa's rand gained 0.4% as data showed net foreign reserves rose in October from September and President Cyril Ramaphosa secured around 360 billion rand ($24 billion) of investment pledges from businesses.

An official from the Chinese commerce ministry said Washington and Beijing have agreed in the past two weeks to cancel tariffs in different phases.

Both sides must simultaneously cancel some tariffs on each other's goods to reach a phase-one trade deal, the official said; the proportion of tariffs cancelled must be the same, and how many tariffs should be cancelled can be negotiated.

The MSCI emerging-market stocks index rose 0.23%. Chinese stocks closed flat. Most other Asian markets made slight gains because of weakness in technology stocks. Istanbul-listed shares rose rose 1.3% and South African shares rose 0.3%.

Analysts warned of Washington's reaction to China's stance.

"China's desire to roll back more U.S. tariffs is likely to require more time to negotiate terms," Philip Wee, FX strategist at DBS Group, wrote in a client note.

Optimism over the trade talks ebbed after Reuters reported on Wednesday that a meeting between U.S. President Donald Trump and Chinese President Xi Jinping to sign the interim trade deal might be delayed until December.

"The erratic news flow doesn't mean progress isn't being made - far from it. And in that regard some optimism is warranted," Societe Generale's Kit Juckes said in a note.

"That doesn't mean the U.S. is certain to escape further slowdown, or even recession next year, but it does mean that a big negative shock is unlikely and maybe that will continue to put a floor under the most trade-sensitive currencies."

The Philippine peso rose 0.3% in its eighth day of gains in the past 10 sessions after data showed the economy grew more than expected in the third quarter, fuelled by buoyant government spending and domestic demand.

Investors will look for reaction in Brazil markets after the real slumped 2% on Wednesday. The country's biggest-ever oil auction disappointed investors when only the state-owned oil company Petrobras and Chinese state companies CNOOC and CNODC submitted bids.

In emerging Europe, the Polish zloty steadied against the euro after the central bank left interest rates unchanged, as expected, and Governor Adam Glapinski said he expected no change in interest rates until his term ends in 2022.

Poland's government approved a transfer of all state-guaranteed private pension funds to individual retirement accounts on Wednesday, in a move that will add 19.3 billion zloty ($5.01 billion) to state revenues.

Gains in other eastern European currencies were tempered when Germany, a key trading partner, reported that industrial output fell more than expected in September.

The Turkish lira rose 0.3% after Trump and Turkish President Tayyip Erdogan confirmed they will meet in Washington on Nov. 13, amid worries of a strained relationship between Washington and Ankara.

Turkish Finance Minister Berat Albayrak also said initial indicators showed economic activity picking up in November and December.

Higher oil prices helped Russia's rouble gain 0.3%. Russia's central bank Governor Elvira Nabiullina said the bank still has room to ease monetary policy but would not rush to cut interest rates.

For GRAPHIC on emerging market FX performance 2019, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance 2019, see 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 Sruthi Shankar in Bengaluru)

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