EMERGING MARKETS-FX index scales 19-month high on Fed rate cut bets

The Thai baht slipped 0.2% after the country left its key interest rate unchanged as expected, while cutting its growth outlook. Meanwhile, the MSCI stocks index slipped 0.2% after hitting a one-week high in early trade, but still on track for its biggest monthly gain since January.

A major emerging market currencies index hit a 19-month high on Wednesday, lifted by optimism U.S. rate cuts are on the horizon, while delivery giant Meituan's cautious outlook sparked concerns over China's consumer spending recovery.

The MSCI currencies index gained 0.3%, rising for three straight days and touching its highest level since April 2022. The index is on track for its best month in a year. Expectations of U.S. policy easing that have been driving the greenback lower got a boost after Federal Reserve Governor Christopher Waller, considered a hawk, said rate cuts could begin if inflation continues on a downward trend for several more months.

The dollar tumbled to a more than three-month low, before regaining some lost ground and standing last at 102.86 against a basket of major currencies. It has lost over 3% so far in November, eyeing its steepest monthly decline in a year. "We see a stronger first-half for EM followed by a weaker second-half, thanks to a U.S. recession and the U.S. election," Citi analysts said in a note.

"The EMFX carry trade will likely do well early in the year, before carry gets too low and global volatility rises." The South African rand rose 0.5% to 18.51 per dollar. Focus was also on a local financial review by the South African Reserve Bank during the day.

The Russian rouble was 0.6% stronger against the dollar at 88.88, rebounding from a more than one-week low on high oil prices, elevated interest rates and capital controls. Meanwhile, Sri Lanka has been informed a debt-restructuring agreement with creditor nations has been reached, but is yet to receive a letter of confirmation, a government source told Reuters.

Dollar-denominated bonds issued by the island nation maturing in 2029 and 2030 rose up to 0.8 cents and 0.6 cents, respectively. The rupee was up 0.3% at 328.20-per-dollar. The Thai baht slipped 0.2% after the country left its key interest rate unchanged as expected, while cutting its growth outlook.

Meanwhile, the MSCI stocks index slipped 0.2% after hitting a one-week high in early trade, but still on track for its biggest monthly gain since January. Hong Kong stocks slumped to a one-month low, with Meituan tumbling 12.2% as it expects fourth-quarter revenue growth for core food delivery business to slow versus the preceding quarter. China's blue-chip CSI 300 Index also lost 0.9%.

A Reuters poll showed China's manufacturing activity likely contracted for a second month in November, keeping alive calls for further stimulus measures. The data is due on Thursday. Pakistan's benchmark stock index hit a fresh record high, before slipping 0.2%, having gained for seven straight sessions.