(Updated at 0900 GMT)

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Moody's says India's water crisis can dent credit strength

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U.S. probes some China firms on internet, cloud risks,

report

says

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Sri Lanka likely to sign agreement with creditors on

Wednesday

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EM stocks and currencies broadly flat

By Johann M Cherian

June 25 (Reuters) - Currencies and stocks in emerging

markets were tepid on Tuesday ahead of key U.S. inflation data

later in the week, while investor focus remained on local

politics in South African and Indian equities notched a record

high.

MSCI's main gauge tracking stocks in emerging markets

edged 0.1% higher, while an index tracking currencies

was flat against the dollar.

Crucial U.S. inflation data on Friday could impact the

trajectory of the Federal Reserve's monetary policy and

influence easing cycles in emerging and frontier markets.

South Africa's rand gave up early gains and slipped

0.2%, while the benchmark stock index shed 0.3% as

investors were on edge after reports of negotiations over

cabinet positions between the two biggest parties in the unity

government.

The 30-year benchmark Treasury bond yield dropped

eight basis points (bps) to 9.775%.

Traders are also monitoring how many ministerial posts would

be assigned to the market-friendly Democratic Alliance party in

one of Africa's biggest economies.

"Politically, it should be noted that coalitions are

something new for South Africa and the African National

Congress. Tensions within the government will, therefore, arise

time and again - a break-up (in the coalition government) is a

possibility at any time," said Volkmar Baur, FX strategist at

Commerzbank.

Meanwhile, China's blue-chip index slipped 0.5%

and Hong Kong's Hang Seng index closed up 0.2%.

The Biden administration is investigating China Mobile

, China Telecom and China Unicom

over concerns the firms could exploit access to American data

through their U.S. cloud and internet businesses by providing it

to Beijing, as per sources. However, shares of the firms settled

higher between 0.6% and 1.9%.

In south Asia, India's BSE Sensex index rose 0.8%

to hit an all-time high, lifted by heavy-weight financials.

Moody's Ratings, which has a Baa3 credit rating on the

country, warned that worsening domestic water shortages can

negatively impact its sovereign credit strength.

Indian bonds will be included in JPMorgan's widely-tracked

emerging market debt index on June 28.

Sri Lanka's main stock exchange was flat. Foreign

Minister Ali Sabry said that the country expects to sign a debt

restructuring agreement with a group of creditor nations on

Wednesday, allowing them to recommence lending to the island

nation that slid into crisis in 2022.

Czech's koruna outperformed central and eastern

European peers, climbing 0.2% against the euro, though it is

likely to see some pressure as economists expect the local

central bank to trim borrowing costs later in the week.