* Turkish central bank expected to hold main rate at 19%
* South African rand at three-month low as unrest continues
* Czech crown down but tighter policy expected to support
July 14 (Reuters) - Emerging market stocks and currencies
fell on Wednesday after a surge in U.S. inflation raised fears
the Federal Reserve might tighten policy sooner than expected,
while Turkey's lira dipped ahead of an interest rate decision.
U.S. consumer prices surged at their fastest pace in 13
years in June, sending the dollar and Treasury yields higher as
markets bet that the Fed would raise rates by the end of 2022.
MSCI's index of emerging market currencies
fell 0.2% while stocks retreated 0.3%. A rise in U.S.
lending rates usually makes risk-driven assets appear less
attractive and drives capital out of emerging markets.
In Europe, the Middle East and Africa, Turkey's lira
fell 0.2% to 8.6373 ahead of an interest rate decision, with the
central bank expected to maintain rates at 19% amid spiking
inflation in the country.
The lira is the worst performing emerging market currency
this year, down nearly 16% on government interference in policy
making. Analysts are doubtful about the lira's prospects,
despite a sharp rebound in growth from the COVID-19 pandemic.
"We are quite cautious about Turkey's macroeconomic
imbalances and uncertain policy outlook with respect to the
central bank, but this does not mean that we do not expect a
punchy activity rebound in the near term," Tatha Ghose, FX and
EM analyst at Commerzbank wrote in a note.
However, Ghose said growth would take a severe downturn in
2022 as Turkey's "unconventional monetary policy experiment
Credit Suisse had said in a note last week that tighter
policy was needed to rein in runaway inflation.
Turkish stocks rose 1% on reports that the country
expanded regulations for asset management firms, allowing for
more flexibility in debt transfers.
South Africa's rand dropped 0.2% to a new three-month
low of 14.7648 to the dollar, with violence in the country
showing little sign of stopping.
The rand tumbled 3.9% over the past two sessions, turning
negative for the year, as violence over the jailing of former
president Jacob Zuma killed more than 70 people, wrecked several
businesses and even shut down the country's largest refinery.
The Czech crown fell 0.2% versus the euro, faring
slightly better than its peers in Central Europe as rising
inflation and comments from central bank officials suggested
more monetary policy tightening was on the way.
Specialist emerging market asset manager Ashmore Group
said its quarterly assets under management rose by $4.5
billion, reflecting some improvement in sentiment towards
emerging markets during the second quarter.
For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh
For GRAPHIC on MSCI emerging index performance in 2021, see https://tmsnrt.rs/2OusNdX
For TOP NEWS across emerging markets
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see
(Reporting by Ambar Warrick; Editing by David Clarke)