*

EM stocks touch more than one-week high

*

Polish insurer PZU shares hit by massive floods

*

South African rand hits over one-week high

*

EM FX up 0.2%, stocks add 0.4%

By Ankika Biswas

Sept 16 (Reuters) - Steady risk appetite propelled an

emerging market currency index to a record high on Monday as

investors were convinced that the U.S. Federal Reserve would

deliver a big interest rate cut in a week marked by other key

central bank policy decisions.

Rising for the fourth session, the MSCI index for EM

currencies scaled a lifetime high, after logging

its biggest one-day gain since Aug. 19 on Friday. The stocks

gauge hit an over one-week high, rising for the third

consecutive day.

While the U.S. Fed is all but certain to cut rates on

Wednesday, the debate is over the size of the cut, with market

bets inclining towards 50 basis points (bps), LSEG data showed.

This follows last week's 25-bps cut by the European Central

Bank.

"The Fed will deliver another cut in November and December

but of 25 bps each. Focus would be on the dot plots and Powell's

assessment of the economy. The 2024 dot plots will likely be

lowered," said Mohit Kumar, chief economist for Europe at

Jefferies.

Lower U.S. rates could give EM central banks more room for

manoeuvre to ease themselves and support domestic growth,

barring the volatility and uncertainty around the U.S.

presidential election.

Latin America and emerging Europe have led the easing cycle

that has already started in half of the emerging markets tracked

by Reuters.

The Bank of England and Bank of Japan are some of the other

prominent central banks to deliver policy decisions this week,

with the yen hitting its highest levels in over a

year.

The South African rand gained 0.7% against the

dollar to an over one-week high, while the yield on the

benchmark 2030 government bond slipped 4 bps.

Investors also geared up for a local inflation print this week.

Hong Kong shares reversed early losses to close up,

with investors assessing yet another batch of underwhelming

economic data that bolstered the case for aggressive stimulus to

shore up the economy and help it hit its annual growth target.

Mainland equity, bond and foreign exchange markets were

closed for the mid-autumn festival break, set to resume trading

on Wednesday.

Poland's blue-chip stock index lost nearly 2%,

dragged by a 4% decline in insurer PZU due to concerns

over the impact of severe flooding.

Among others, Sri Lankan and Indonesian stock markets were

shut due to public holidays.

Major stock markets in the Gulf also rose ahead of the Fed

decision, boosted by strong oil prices - a catalyst for Gulf

financial markets. Monetary policy in the Gulf Cooperation

Council often aligns with the Fed's decisions as most of the

regional currencies are pegged to the U.S. dollar.

HIGHLIGHTS:

** S&P revises Saudi Arabia's outlook to positive on

advancing non-oil economy

** Mexico's sweeping judicial overhaul formally takes effect

** Argentina's Milei pledges to protect fiscal balance in

budget speech