Emerging FX-Lira at new 11-mth high, others lacklustre

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LONDON, April 25 (Reuters) - Turkey's lira hit new 11-month highs on Wednesday as markets showed their approval of the ruling party's presidential candidate, its gains contrasting with generally lacklustre moves on other emerging markets.

Gains on Tuesday were muted after the announcement, which was formally made after the Turkish stock market closed for the day, but on Wednesday the lira firmed half a percent to a high of 1.3320 per dollar .

Turkish stocks gained over half a percent after the announcement that Foreign Minister Abdullah Gul would run for president rather than Prime Minister Tayyip Erdogan, a former Islamist whose candidacy was opposed by the secular elite.

"People have been reassured by the fact that Erdogan won't be running for the presidency and Gul is acceptable to markets," said Societe Generale currency strategist Murat Toprak.

"But I don't think we can expect more lira gains from current levels. Even bonds have rallied a lot and I don't think this trend can continue," he said, noting the election cycle still lies ahead.

The lira is up some 8 percent since early March as yield-hungry investors have shrugged off pre-election jitters and piled into one of the few emerging markets that still offers a double digit return.

Some analysts predict more gains. SEB analysts said Gul's nomination and the fact Erdogan would remain PM boded well for further reforms and added: "We target dollar/lira at 1.31 soon."

The other major dollar cross, the South African rand, traded in a 7-7.04 per dollar range as data showed March CPIX inflation rate was 5.5 percent, the highest level since 2003. Analysts said the rate could accelerate further and could bust the central bank's 3-6 percent target band in the coming months.

CENTRAL EUROPE LACKLUSTRE

Central European currencies hovered around flat, supported by positive moves on European stock markets but kept in check by investors' reluctance to extend long risk positions.

European bourses appeared to have shrugged off Tuesday data showing U.S. existing home sales posted their biggest monthly drop in 18 years and consumer sentiment hit an eight-month low.

British, French and German bourses all opened stronger, taking their cue from New York's benchmark Dow Jones average which closed near a record level of 13,000 points.

"The currencies have not been big movers today or in the last few days. With the Dow at a record high and other equities following, one or two bad numbers are not going to do too much damage," a currency trader in London said.

"Underlying sentiment is still pretty good ... but I'm not expecting big moves," he said, adding that investors appear reluctant to push currencies any higher from current levels.

The Polish zloty, for instance, has already rallied almost 2.5 percent since the end of March, hitting a one-year high earlier this week as markets priced in policy tightening.

By 1030 GMT, it traded around flat at 3.78 per euro before a central bank announcement that is expected to deliver a 25 basis points rate rise for the first time in three years. Many analysts expect Polish rates to rise 75 bps this year.

The Slovak crown firmed 0.11 percent to 33.83 per euro after the central bank cut rates by 25 bps to 4.25 percent on Tuesday, while the Czech crown eased 0.15 percent to 28.09 per euro . The forint eased 0.29 percent to 246.15 per euro .

The robust German Ifo business sentiment survey was positive for central European currencies which benefit from export growth to the euro zone but they failed to react significantly.

"We are at quite high levels on all the currencies and I think for the next two or three months the upward potential for emerging markets is limited," Societe Generale's Toprak said. "I'm globally short risk at current levels and I'm looking for a correction to re-enter."