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Optimism over China's economic recovery lifted an emerging stock markets benchmark for a third straight session on Thursday, while currencies were subdued amid signs that the Federal Reserve's rate-hike cycle may not end anytime soon.
Shanghai shares jumped more than 1% as investors bet that the unwinding of stringent COVID rules in China and support measures will boost economic growth despite a surge in infections.
Hong Kong's Hang Seng index added 1.3% as China looked to reopen the border with its special administrative region on Sunday for the first time in three years.
The MSCI's EM equities index rose 0.8% to hit a one-month high, with bourses in Warsaw, Budapest and Johannesburg all gaining.
While China's yuan continued to be supported by hopes of economic recovery, other developing world currencies moved little against the dollar.
Minutes from the Federal Reserve's December meeting, when the central bank shifted to a smaller 50 basis point rate hike, showed on Wednesday that officials agreed to slow the pace of rate increases but no participant expected rate cuts in 2023.
"The futures market pricing is still for the Fed to stop shy of the 5% handle and to cut rate by end-2022. So the key question remains if the recession or recovery theme will dominate in 2023," strategists at OCBC Bank wrote in a note.
"Our base case remains that there will be short-term pain in the form of recession (or technical recessions) in many economies accompanied by heightened market volatility in 1H23 before a stronger growth trajectory and risk appetite recovery in 2H23."
Emerging markets assets suffered sharp losses in 2022 as the Fed embarked on the most aggressive tightening cycle in decades to tame inflation, while pandemic disruptions and the Russia-Ukraine war drove up prices of everything from oil to food.
Ukraine's gross domestic product fell by 30.4% in 2022 - the largest annual contraction in over 30 years - because of the war with Russia, Economy Minister Yulia Svyrydenko said, although the fall was smaller than initially feared.
The South African rand slipped about half a percent to 16.9 per dollar after a survey showed private sector activity expanded in December but at a slower pace than in November.
The Hungarian forint weakened against the euro after touching a near five-month high in the previous session, when minutes from the central bank's December meeting showed policymakers favoured maintaining tight monetary conditions over a prolonged period.
Hungary issued a total of $4.25 billion worth of dollar-denominated benchmark bonds, Finance Minister Mihaly Varga said, with bids exceeding $12 billion.
The Egyptian pound touched a fresh record low at 26.6 per dollar, a day after its biggest slide since the central bank devalued the currency in October and agreed to a $3 billion financial support from the International Monetary Fund.