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PCE data due at 1230 GMT

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Chinese yuan, South African rand at over one-year highs

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EM stocks up 0.5%, FX adds 0.1%

By Shashwat Chauhan

Aug 30 (Reuters) - Most emerging market currencies were

higher on Friday as the dollar weakened ahead of crucial U.S.

inflation data that could offer clues on the size of possible

interest rate cuts by the Federal Reserve next month.

The Fed's preferred inflation measure - the personal

consumption expenditures (PCE) index - is due at 1230 GMT and

could offer hints on the size of potential rate cuts.

Analysts anticipate headline inflation to rise 0.2% in the

month of July, while 'core' inflation, which excludes volatile

components like food and energy, is also expected to rise by the

same level.

"We are aligned with the consensus for a 0.2% MoM call,

which should keep markets attached to their call for 100 bps of

easing by year-end," said Francesco Pesole, FX strategist at

ING.

China's yuan appreciated 0.3% in offshore trading,

reaching its highest level in over a year, while stocks

closed higher.

In Central Eastern Europe, Poland's zloty gained

0.1% against the euro after preliminary data showed inflation

stood at 4.3% on a year-on-year basis in August, compared to

analysts' expectations of a 4.2% reading.

Separately, updated statistics office data showed domestic

demand fuelled by brisker government expenditure drove the Czech

economy's slow recovery in the second quarter.

South Africa's rand was up 0.8% against the dollar,

hitting its highest level since July 2023, while stocks

were muted.

MSCI's index for emerging market stocks added 0.5%

by 0830 GMT, while a gauge for currencies edged

up 0.1%. Both are headed for monthly gains.

Global equities saw sharp declines earlier this month as

investors dumped risk assets after a hot July jobs report in the

United States fanned worries of a recession in the world's

biggest economy.

Those worries have since faded as data throughout the month

showed a resilient U.S. consumer, with stocks back above levels

seen before the selloff.

Also adding to the volatility was a surprise rate-hike by

the Bank of Japan earlier this month, which saw the yen

rise and sharp unwinding of currency "carry" trades, where

investors borrow in low-yielding currencies such as the yen to

invest in high yielding assets like stocks.

High-yielding EM currencies saw sharp declines, but have now

recovered as markets gear up for an interest rate cut by the Fed

next month, following Chair Jerome Powell's dovish tilt last

week.

Markets in Turkey were shut for a public holiday.

HIGHLIGHTS:

** Russia payment hurdles with China partners intensified in

August, sources say

** China's interest rate reform will be 'arduous, long'

process

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