EMERGING MARKETS-Stocks, FX extend rally; Pak equities hit record high

However, JP Morgan points out after filing through the EPFR data, that outflows from EM bond funds are still high across both hard and local currencies. Pakistan's benchmark stock index surged 0.9% and hit a record high, a day after the country announced general election dates and the International Monetary Fund mission met with Pakistani authorities.

Risk taking in emerging markets gained steam on Friday with stocks and currencies on track for weekly gains, as investors stayed hopeful of U.S. rates peaking, while Pakistan's main index hit a record high.

MSCI's index tracking emerging markets equities were up 1.3%, while a basket of regional currencies strengthened 0.3% against the dollar by 0917 GMT. Following Federal Reserve's Chair Jerome Powell's comments on Wednesday, markets gained on the possibility that the central bank was done with rate hikes. However, U.S. October non-farm payrolls data due at 1230 GMT could be a test for the optimism.

EM stocks and currencies are eyeing their best weekly performances since July, with stocks set to end the week up 2.5% and the basket of currencies up 0.7%. However, JP Morgan points out after filing through the EPFR data, that outflows from EM bond funds are still high across both hard and local currencies.

Pakistan's benchmark stock index surged 0.9% and hit a record high, a day after the country announced general election dates and the International Monetary Fund mission met with Pakistani authorities. The local rupee was up 0.3%.

"Efficient handling of economic matters by the caretaker government is helping the economy and there are clear signs of economic revival," said Mohammad Sohail, CEO of Topline Securities in Pakistan. "After many years it looks like that IMF review will be completed smoothly this month. Moreover announcement of election dates has also helped support sentiment."

The South Asian country is operating under a caretaker government after an IMF loan programme, approved in July, helped avert a sovereign debt default. Also aiding gains, a private survey showed China services activity picked up in October, giving Hong Kong stocks a boost of 2.5%, their best one-day performance in three months.

Traders also gauged the impact of Washington's latest sanctions against Russia over the war in Ukraine. The rouble edged up at 93 to the dollar. Turkey's lira weakened to 28.4 after data showed annual consumer price inflation dipped slightly to 61.4% in October.

Meanwhile in Africa, the South African rand slipped 0.3% after a survey showed private sector activity fell in October. Ethiopia's birr was muted after ratings agency Fitch downgraded the country's foreign currency debt deeper into junk territory, citing increased likelihood of a default.

In central Europe, Romania's leu traded tepidly against the euro ahead of Moody's review of the country's credit rating.