(Updated at 0918 GMT)

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US June CPI data due at 1230 GMT

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Poland's Pepco drops as Q3 LFL sales fall short of

expectations

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Czech central bank can cut rates further, vice-governor

says

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Uganda starts buying local gold to support forex reserves

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Stocks up 1%, FX up 0.1%

By Johann M Cherian

July 11 (Reuters) - Risk sentiment got a lift across

emerging markets on Thursday, with an index tracking equities

hitting over a two-year high, while Kenyan assets were in focus

after brokerage Citi downgraded the east African country's

international bonds.

MSCI's index is tracking stocks in developing economies

added over 1%, lifted by heavyweight China's main

indexes , which settled over 1% each, after the

local securities regulator announced more curbs on short-selling

and pledged tighter scrutiny of computer-driven programme

trading.

With equity indexes near pandemic lows and bond yields at

record lows, all eyes are on the once-in-five-year Communist

Party's meeting early next week as traders anticipate measures

to boost growth and confidence in the world's second-largest

economy.

Zin Bekkali, founder of Silk Invest, said that while the

macroeconomic recovery is slow and painful, China remains an

attractive investment destination, with opportunities in the

bigger and globally exposed corporations and the mid-to-small

cap companies.

Kenya's shilling weakened to a one-month low

against the euro, while the yield on dollar bonds

slipped between 4 and 9 basis points (bps).

Citi downgraded the east African nation's international

bonds to "underweight", saying it expected fiscal concerns to

persist and saw a "significant" risk of more credit rating

downgrades after Moody's slashed the country's rating on Monday.

"The (International Monetary Fund-led) policies that have

been implemented in Kenya, Nigeria and Egypt are painful, but

with new reforms by the governments, it should set the tone for

more sustainable economies going forward," Bekkali added.

In eastern and central Europe, Czech crown hovered

near three-month lows, a day after data showed inflation within

the central bank's limit. Vice-Governor Eva Zamrazilova said the

regulator could ease monetary policy further but does not need

to quicken its rate-cutting pace, as per a report.

Earnings were centerstage in Poland, with the main stock

index flat, weighed down by a 1.3% drop in Pepco

as the discount retailer reported a

worse-than-expected fall in third-quarter underlying revenue.

In South Asia, India's rupee inched 0.1% lower.

Indians have been allowed wider usage of foreign currency

accounts at the Gujarat International Finance Tec-City, or GIFT

City, boosting business prospects for a finance hub pushed by

Prime Minister Narendra Modi.

Elsewhere, Uganda's shilling inched up 0.1%. The

domestic central bank has begun buying locally produced gold to

bolster its depleted foreign reserves and tackle emerging

challenges in international financial markets.

Attention will also be on a key U.S. inflation report due

later in the day, along with central bank decisions out of

Serbia, Korea and Malaysia.