EMERGING MARKETS-Dollar surge sends emerging currencies reeling

By Alexander Winning

LONDON, Oct (Shenzhen: 000069.SZ - news) 2 (Reuters) - Emerging market currencies slipped

on Monday, extending losses from last week as a strong dollar

and rising U.S. Treasury yields outweighed upbeat factory data

from China.

Emerging markets are one of the top-performing asset classes

of 2017, with double-digit gains in some sectors, but they have

fallen back in recent weeks as the dollar has risen on

expectations of a U.S. rate rise by the end of the year and the

possible appointment of a more hawkish U.S. Federal Reserve

chief.

South Africa's rand , Russia's rouble and

Turkey's lira all fell around 0.5 percent against the

dollar as the dollar index rose further after enjoying

its best week of 2017 last week, and yields on 10-year U.S.

Treasuries hit their highest since July.

Emerging currencies hit five-week lows last week on

JPMorgan (LSE: JPIU.L - news) 's ELMI Plus index, losing more than 1 percent.

"You're seeing some repricing on the U.S. side on a

combination of the possibility of tax reform in the U.S. being

approved and maybe a more hawkish Fed governor," said Jakob

Christensen, an emerging markets analyst at Danske Bank (LSE: 0NVC.L - news) .

"That is playing into a stronger dollar, and goes hand in

hand with higher U.S. rates, which is typically tricky for

emerging markets," he said.

Investors were cheered by data showing manufacturing

activity in China grew at the fastest pace since 2012 in

September since that data paints a rosy picture for demand for

emerging market exports.

But with markets in China, South Korea and India closed for

public holidays, MSCI (Frankfurt: 3HM.F - news) 's benchmark emerging equity index

was little changed, and trading some 3 percent below

three-year highs struck in September.

There were gains, however, on emerging European equities,

with Warsaw and Budapest rising 0.7 and 0.9 percent respectively

, after robust purchasing manager (PMI) surveys.

"On the equity side we have seen a significant rally and

maybe the prices are beginning to be a bit stretched, but the

strong PMIs suggest the global economy is doing quite well and

supporting the trade-oriented emerging markets," Danske Bank's

Christensen said.

On bond markets, Abu Dhabi was the latest country to test

markets with plans for a triple-tranche U.S. dollar-denominated

bond issue .

Demand remains strong for emerging market paper, with the

spread of sovereign debt over U.S. Treasuries near its lowest

since August 2014 . Average yields on emerging currency

debt nudged back below 6 percent after rising last week

.

JPMorgan analysts said that while headwinds for emerging

debt had increased, they remained overweight.

"Given the repricing that has already been seen in market

expectations for U.S. rates and emerging currency valuations

that are attractive, we are inclined to think the worst of this

move is behind us," they told clients.

For GRAPHIC on emerging market FX performance 2017, see http://tmsnrt.rs/2e7eoml

For GRAPHIC on MSCI emerging index performance 2017, see http://tmsnrt.rs/2dZbdP5

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see )

Emerging Markets Prices from Reuters

Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley (Xetra: 885836 - news)

Emrg Mkt Indx 1082.34 +0.62 +0.06 +25.52

Czech Rep 1049.86 +4.69 +0.45 +13.92

Poland 2474.34 +20.88 +0.85 +27.02

Hungary 37652.53 +361.88 +0.97 +17.65

Romania 7898.57 +20.65 +0.26 +11.48

Greece 742.15 -13.46 -1.78 +15.31

Russia 1133.85 -2.90 -0.26 -1.60

South Africa 49661.97 +285.51 +0.58 +13.12

Turkey 03528.51 +620.77 +0.60 +32.49

China 3349.22 +9.57 +0.29 +7.91

India 31283.72 +1.24 +0.00 +17.49

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2017

Czech Rep 25.96 25.97 +0.05 +4.04

Poland 4.31 4.31 -0.05 +2.09

Hungary 311.09 311.54 +0.14 -0.73

Romania 4.59 4.59 +0.09 -1.14

Serbia 119.05 119.10 +0.04 +3.61

Russia 57.84 57.51 -0.58 +5.92

Kazakhstan 341.05 340.28 -0.23 -2.17

Ukraine 26.66 26.60 -0.21 +1.29

South Africa 13.62 13.55 -0.52 +0.84

Kenya 103.10 103.10 -0.00 -0.71

Israel 3.54 3.53 -0.17 +8.81

Turkey 3.58 3.56 -0.40 -1.41

China 6.65 6.65 -0.00 +4.35

India 65.31 65.31 +0.00 +4.04

Brazil 3.16 3.16 -0.08 +2.83

Mexico 18.27 18.25 -0.11 +13.39

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 304 -2 .02 8 03.45 1

All data taken from Reuters at 09:19 GMT.

Currency percent change calculated from the daily U.S.

close at 2130 GMT.

(Reporting by Alexander Winning and Claire Milhench, editing by

Louise Heavens)