*

Mainland China, Hong Kong shares drop after long weekend

*

South African rand gains as unity government talks

continue

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Slowing Czech inflation keeps rate cut path clear

*

IMF reaches staff level agreement with Kenya

*

FX down 0.3%, stocks off 0.1%

By Ankika Biswas

June 11 (Reuters) - Emerging market equities dipped on

Tuesday, weighed down by Chinese stocks as investors grew

increasingly wary of the U.S. rate outlook ahead of this week's

Federal Reserve's policy decision, while also monitoring EM

political developments.

The MSCI index for EM equities was 0.3% lower at

0900 GMT, with Hong Kong and Mainland China stocks falling to

multi-month lows after a long weekend as sentiment was bruised

by last week's hot U.S. jobs data that saw a dramatic paring of

U.S. rate cut bets.

The currencies gauge edged 0.1% lower, set

for its third day of losses.

The Federal Reserve's June interest rate decision comes on

Wednesday, with a series of U.S. inflation reports also

scheduled this week.

Meanwhile, data showed Czech inflation slowed more than

expected in May, following a surprise jump to the top end of the

central bank's tolerance band the previous month, likely keeping

the path clear for further interest rate cuts.

The crown was down 0.5% against the dollar, with

other Central and Eastern European currencies also under

pressure for a third straight session.

A Reuters poll showed Taiwan is expected to keep its policy

rate unchanged this week and to stay the course until late next

year. Taiwan's dollar was down 0.4%.

Minutes showed most Bank of Korea board members see the need

to be cautious about easing policy at their May meeting.

Investor focus has also been on the elections in a number of

major emerging markets.

The South African rand gained against the dollar as

political parties continued talks to try and form a government

of national unity ahead of Friday's first sitting of lawmakers.

The Mexican peso remained under pressure, down 1.1%

against the dollar, after President-elect Claudia Sheinbaum said

on Monday she would encourage broad discussions over proposed

constitutional reforms, including a judicial overhaul, before

the next congressional session kicks off.

"I think people forget a bit that this (peso weakness) also

coincides with investors having made a lot of money being long

on the peso...it was likely the biggest consensus long in EMs

currencies for quite a while," said Michael Bolliger, chief

investment officer, EMs, UBS Global Wealth Management.

Kenya reached a staff level agreement with the International

Monetary Fund, paving the way for the disbursement of about $976

million.

The shilling was slightly up, with dollar inflows

from tea, coffee and horticulture exports expected to strengthen

it in the coming days.

HIGHLIGHTS:

** Bank Indonesia to use all monetary instruments to

stabilise rupiah- deputy governor

** Philippine cbank says Q3 interest rate cut still on table

** India PM Modi's government to stick to deficit target

despite poll setback- source