* Stocks hit more than three-week high on US stimulus hopes
* Russia's rouble still under pressure near bottom of band
* Regional currencies weaker after rate cuts
* Czech Republic sees no Eurobond, Indonesia to go ahead
By Peter Apps
LONDON, Feb 6 (Reuters) - Emerging stocks rallied on Friday
following other global markets on hopes of a U.S. fiscal
stimulus package, with stocks hitting a more than three-week
high in a fourth day of gains but regional currencies down.
Analysts said central and eastern European currencies would
remain under pressure after a week when Russia suffered a credit
rating downgrade and Kazakhstan devalued its currency.
Benchmark emerging equities <.MSCIEF> were up 2.32 percent
by 1200 GMT, now down only 3.18 percent on the year.
In another sign of heightened risk appetite, emerging
sovereign debt spreads <11EMJ> were four basis points narrower
at 641 bps over US Treasuries.
"It does feel a little bit more positive today," said State
Street emerging markets strategist Carlin Doyle. "Clearly
there's a good expectation that what the U.S. is doing at the
moment is beginning to work."
The U.S. Senate is expected to discuss President Barack
Obama's $920 billion economic stimulus package again on Friday.
But Doyle said much would also depend on U.S. January
unemployment figures at 1330 GMT. <ECON>
"If we get a very bad number in the afternoon, all the gains
that we've seen in the emerging markets for the last couple of
days could reverse quite quickly," he said.
Polish stocks <> rose 2.36 percent, while equities in
South Africa <.JTOPI> rose 3.68 percent.
Russia's rouble remained under pressure towards the bottom
of its new trading band as it had been all week, trading at
40.90 <RUS=MCX> -- a whisker away from the lower limit of 41.
Having spent roughly a third of its reserves slowing the
decline of the rouble in recent months, Russia had hoped
widening the band would finally put a floor under its decline.
But many in the market continued to bet on further devaluation.
The cost of insuring Kazakhstan's sovereign debt in the
credit default swaps market continued to rise slowly in
increasingly illiquid trade after the government took stakes in
struggling banks and devalued the tenge currency.
Kazakh CDS was quoted at 1100-1200 bps on Friday having
broken through the 1000 bps mark on Monday, meaning it would
cost $1.1-1.2 million a year to protect $10 million of five-year
debt.
Regional currencies began in positive territory before
sinking a day after the Czech Republic and South Africa both cut
rates in an attempt to protect growth, but with policymakers
seen having little further room for dovishness.
The Czech crown was down 0.34 percent against the euro
<EURCZK=>, but above recent 1-1/2 year lows, after the central
bank cut rates to a historic low at 1.75 percent on Thursday.
The South African rand <ZAR=> was down 0.9 percent against
the dollar after the central bank cut the repo rate to 10.5
percent on Thursday.
The Hungarian forint <EURHUF=> was down 0.3 percent but
above recent record lows, while the Polish zloty <EURPLN=> was
steady after hitting a 4-1/2 year low this week.
Having downgraded Russia, ratings agency Fitch warned on
Thursday of further downgrades likely across emerging Europe.
Once touted as among the most appealing emerging markets,
Eastern Europe is now seen as one of the most exposed regions to
the global crisis and BNP Paribas warned in a research note that
currency strength in recent days might quickly falter.
"We believe that the recent rebound across CEE currencies
against the euro is only a retracement and would be short-lived,
as we continue to see further downside pressures in the region,"
BNP Paribas analysts said.
There was mixed news on Eurobond issues after a recent
flurry of activity, with the Czech Republic's deputy finance
minister saying spreads were too wide for the country to look at
issuing a Eurobond. []
But Indonesia said it would likely push ahead with an issue,
which rating agencies estimate could raise as much as $4
billion. []
(Additional reporting by Carolyn Cohn and Phakamisa
Ndzamela; Editing by Ruth Pitchford)
