*

Turkey central bank expected to hold rates steady

*

Indonesia's central bank intervenes in FX market

*

EM assets hit by risk-off mood as Iran-Israel conflict

rages on

By Medha Singh

June 19 (Reuters) - Emerging market stocks and

currencies hit a two-week low on Thursday against a stronger

dollar as the escalating Israel-Iran conflict drove investors

toward safe-haven assets.

Oil prices rose and global stocks slid as Israel struck a

key Iranian nuclear site and Iranian missiles hit an Israeli

hospital. Meanwhile, President Donald Trump kept the world

guessing about whether the U.S. would join Israel in airstrikes.

MSCI's index for emerging market equities fell

1.4%, while a parallel index for currencies

eased 0.2%.

"Geopolitics is still front and centre for markets even as

we are in the midst of a busy central bank week. The Israel-Iran

conflict is now being viewed by investors through the lens of

whether the US gets involved or not," said Neil Wilson,

strategist at Saxo Markets.

Stock markets across the Middle East have tumbled following

the bombing of Iran a week ago, with major indices in the UAE,

Egypt, and Saudi Arabia posting sharp losses.

In a striking exception, Israel's financial markets appeared

resilient, with the blue-chip Tel Aviv 35 index rising

for the fifth day to fresh record high on Thursday. The shekel

has recovered to 3.482 per dollar from a one-half month

low of 3.680 on Friday.

The Turkish lira, among the worst performing

currencies this year, dipped to a new three-month low at 39.565

per dollar ahead of a central bank meeting where rates are

expected to remain steady.

After the jailing of Istanbul Mayor Ekrem Imamoglu sparked a

sharp selloff in Turkish assets in March, the central bank hiked

its policy rate to 46% from 42.5% in April, reversing an easing

cycle that had begun in December.

The central bank will announce its next interest rate

decision at 1100 GMT on Thursday.

U.S. Federal Reserve Chair Jerome Powell on Wednesday said

inflation is expected to go up over the summer as President

Donald Trump's tariffs work their way to consumer, further

aiding the dollar's rise.

In Asia, the Philippine peso was largely unchanged

near its two-month low after central bank cut its policy rate by

25 basis points as expected. The Taiwan dollar fell

0.3% after the central bank kept its policy rate unchanged.

Indonesia's central bank intervened in the foreign exchange

market in a measured way, an official said after the rupiah

had fallen to a one-month low against the U.S. dollar.

The South African rand dipped 0.1% largely in line

with peers ahead of central bank's June Financial Stability

Review, in which it evaluates risks to the country's financial

stability and outlines the policy actions taken to mitigate

them.

In Central Europe, the Romanian leu was trading

largely unchanged at 5.0295 per euro and the Hungarian forint

fetched 403.03, down 0.2%.

U.S. and Polish markets were closed on Thursday for a

holiday.

The St Petersburg forum, Russia's biggest annual economic

forum is currently underway. Russian Deputy Prime Minister

Alexander Novak has said that he expected Prince Abdulaziz bin

Salman, Saudi Arabia's energy minister to attend the forum on

Thursday.

HIGHLIGHTS:

** Turkey central bank expected to hold rates steady, trim

upper band

** Rwanda, DRC initial peace agreement ahead of signing next

week

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