EMERGING MARKETS-Stocks up on Fed rate pause hopes, Turkey's lira resumes selloff

Emerging market stocks climbed on Friday as bets of a rate hike pause by the U.S. Federal Reserve gained steam after data hinted at a cooling labor market, while Turkey's lira weakened further to an all-time low. MSCI's emerging markets (EM) equities index rose 0.7% by 0907 GMT and was set for its second straight weekly gain.

Emerging market stocks climbed on Friday as bets of a rate hike pause by the U.S. Federal Reserve gained steam after data hinted at a cooling labor market, while Turkey's lira weakened further to an all-time low.

MSCI's emerging markets (EM) equities index rose 0.7% by 0907 GMT and was set for its second straight weekly gain. The index was back up at a near two-month high, after being pressured on Thursday by concerns that the global rate-hike cycle could last longer after surprise hikes by the Bank of Canada and the Reserve Bank of Australia.

However, risk sentiment received a boost on Friday while the dollar stumbled, after a spike in U.S. weekly jobless claims raised hopes that the Fed would pause its tightening at its meeting next week. China's blue-chip shares rose 0.7% on Friday, buoyed by optimism over policy support for automobile and technology sectors.

However, a steep drop in China's factory gate prices in May kept a lid on investor sentiment, with the Chinese yuan was down 0.1% against the dollar. Turkey's lira recorded a fresh low of 23.53 to the dollar, extending a heavy selloff in recent days which had been seen as a sign that authorities were easing controls on the foreign-exchange market.

President Tayyip Erdogan on Friday appointed Hafize Gaye Erkan, a finance executive in the United States, to head Turkey's central bank, which is widely expected to reverse course and tighten policy after years of rate cuts and a simmering cost-of-living crisis. The lira steadied a bit on Thursday prior to the appointment with traders saying authorities were once more stabilising things by providing more liquidity.

The return of forex interventions "is to be expected because the built-up depreciation pressure was clearly too strong for the economy to simply stand-by and digest the consequences," Commerzbank FX analyst Tatha Ghose said in a note. Also, Turkey's industrial production dropped 0.9% month-on-month in April, data showed on Friday.

The Russian rouble weakened to a more than two-month low past 83 against the dollar on Friday, ahead of an expected interest rate hold by the country's central bank. EM debt funds recorded outflows worth $63 million this week, down from outflows of $982 million in the previous week, according to calculations from Morgan Stanley.

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