By Susan Mathew
Nov 24 (Reuters) - An index of emerging market stocks jumped 1.2% on Thursday and currencies were on track to mark their best day in two weeks after less-hawkish minutes from the U.S. Federal Reserve's last policy meeting lifted hopes of slower interest rate hikes.
Malaysian assets popped after opposition leader Anwar Ibrahim was appointed prime minister, ending a political impasse following Saturday's general election. The ringgit jumped 1.8% against the dollar, while stocks surged 4%.
In an otherwise light trading day, given the Thanksgiving holiday in U.S. markets, emerging market investors were awaiting central bank decisions from Turkey and South Africa.
Turkey's lira was little changed. The central bank is expected to cut rates by another 150 basis points to 9% and halt an easing cycle that was prompted by President Tayyip Erdogan's call for stimulus despite more than 85% inflation.
"Interest rates are no longer a focus for international investors, who are now only very marginal players in the Turkish FX and rates markets," said Daniel Wood, portfolio manager, EM debt at William Blair Investment Management.
"As holders of Turkish dollar denominated bonds, our attention is now on the wider economic policy and whether it is sufficient to avoid a balance of payments crisis... As such, investor focus has shifted to the ability of Turkey to continue to service its economic debt particularly with elections expected to be held next year."
South Africa's rand rose 0.6% to hit three-month highs. Data on Wednesday showed an unexpected rise in inflation, strengthening the case for a 75 basis points hike from the central bank.
Most other emerging market currencies firmed as the dollar wilted as a "substantial majority" of policymakers at the Fed's Nov. 1-2 meeting agreed it would "likely soon be appropriate" to slow the pace of rate hikes, minutes showed.
Central banks' intense fight against inflation this year have seen risk assets take a beating, as investors worried about a consequent hit to economic growth.
Coupled with worries about China's zero-COVID policy hindering growth in the world's second-largest economy, emerging market currencies are on course for their worst year since 2015, while stocks have lost more than 20% - their sharpest decline since a global financial crisis riddled 2008.
Mainland China stocks bucked a rally in most emerging markets, as the number of COVID-19 cases in the country hit a record high. Investors worry that this could see China reverse some recent easing in curbs or addition of more, hitting economic activity. For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX