EMERGING MARKETS-EM assets hit multi-month highs on soft US CPI, positive China data

The South African rand climbed 0.1% and the benchmark equity index jumped nearly 2% ahead of September retail sales data. The Russian rouble on Wednesday soared to its highest levels since early July against the dollar, boosted by continued supply of foreign currency by exporters, high interest rates and relatively strong oil prices.

Emerging market assets jumped, hitting multi-month highs on Wednesday, as softer U.S. inflation data bolstered bets of an end to the Federal Reserve's interest rate hikes, while positive Chinese economic data also boosted risk sentiment.

MSCI's index tracking emerging market equities jumped 2.3% by 0937 GMT, hitting its highest level in nearly two months. A basket of regional currencies climbed 0.7%, marking the highest levels since August.

If gains hold, the broader equity index is set for its best day since June, while the FX index is on track for its best session since late March. Data on Tuesday showed U.S. consumer prices(CPI) were unchanged in October and the annual rise in underlying inflation was the smallest in two years.

Cooling inflation will allow the Fed to hold off on further interest rate hikes and potentially start cutting rates by May, traders bet on Tuesday. Investors will also monitor talks between U.S. President Joe Biden and Chinese President Xi Jinping and more U.S. economic data.

The dollar index last stood at 104.260, after having slumped on Tuesday post the CPI data. "While we agree with the peak Fed rate narrative, it is important to consider what we get from here," Charu Chanana, market strategist at Saxo Markets said in a note.

"Growth data becomes extremely key from here and today's (U.S.) retail sales print will be one to watch," Chanana added. China's industrial output and retail sales growth beat expectations in October, but the underlying economic picture highlighted significant pockets of weakness.

Chinese shares rose 0.6%, while blue-chips climbed 0.7%. Hong Kong shares jumped 3.9%, leading broader equity gains. China's central bank ramped up injections of liquidity but kept the interest rate unchanged when rolling over maturing medium-term policy loans on Wednesday, matching market expectations.

The yuan gained 0.1% against the dollar. In Europe, Poland's final October CPI on an annual basis came in at 6.60% compared to a previous estimate of 6.50% for the same period, data showed.

The Polish zloty rose 0.2% against the euro. The South African rand climbed 0.1% and the benchmark equity index jumped nearly 2% ahead of September retail sales data.

The Russian rouble on Wednesday soared to its highest levels since early July against the dollar, boosted by continued supply of foreign currency by exporters, high interest rates and relatively strong oil prices. The rouble was last up 1.5%.

Kenya's shilling hovered around all-time lows against the greenback on Wednesday, hurt by higher demand for dollars from importers in various sectors, amid low hard currency inflows, traders said. On the data front, October CPI for Israel and Nigeria and third-quarter GDP for Russia and Colombia are due later in the day.

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