EMERGING MARKETS-FX lower as dollar recovers; Czech crown higher before rate decision

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Israeli army prepares for departure of Gaza residents

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China challenges U.S. tariffs at WTO

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Czech Republic interest rate decision expected

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MSCI EM FX down 0.2%, stocks up 0.3%

By Purvi Agarwal

Feb 6 (Reuters) - Most emerging market currencies were lower on Thursday, pressured by a rebound in the dollar index, while investors awaited more clarity on U.S. President Donald Trump's policies that have clouded the outlook for EM assets globally.

MSCI's index tracking global EM currencies was down 0.2%, while the stocks gauge was up 0.3%, on track for its third consecutive session of gains.

The Czech Republic awaited a local monetary policy decision, where the central bank is expected to resume its monetary policy easing cycle with a 25 basis point cut.

Inflation in the country slowed less than expected to an annual 2.8% in January, as per a flash estimate. The crown was 0.2% higher.

"We have been bearish since the last inflation print, which has produced mixed results. For today, the soft inflation number this morning will bring a higher EUR/CZK..." said analysts at ING.

"The central bank's new forecast should see some dovish revisions but the governor's tone will be hawkish in our view."

Investor focus remained on the Middle East, as Israeli local media reported that the army was ordered to prepare a plan to allow the "voluntary departure" of residents from Gaza.

The decision follows Trump's controversial plan to takeover Gaza on Tuesday, that drew international condemnation.

Israel's shekel was flat against the dollar, while its stocks and dollar bonds in Israel, Egypt and Jordan were little changed.

Meanwhile, Israel is assessing the feasibility of developing a market for repurchase transactions involving the country's government bonds as the conflict weighs on its economy.

Russia's rouble strengthened 1.2% against the dollar, trading at its highest levels in two weeks, over the counter data showed. Ukraine's dollar bonds broadly gained about 1 cent each on hopes of a peace deal between the warring counties.

Traders are shrugging off concerns of a global trade war risk, and are hoping to expect more of the same when it comes to eventual talks between the US and China.

China challenged the 10% tariffs U.S. imposed on its imports on Tuesday, and his cancellation of a duty-free exemption for low-value packages. Bourses in China closed over 1% higher.

Elsewhere, a Mexican official said the country and the U.S. had agreed to economic dialogue.

Hungary's forint and Polish zloty led declines among emerging Europe currencies, that fellc0.4% each against the euro. The rand was 0.3% lower.

Regional bourses were broadly higher, with the ones in Poland and Hungary gaining over 1.5% each.

HIGHLIGHTS:

** Zloty to lead central European currency retreat after multi-year highs

** Surging dollar spurs jump in corporate FX hedging

** Hungary's retail sales rise 0.1% in annual terms in December

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(Reporting by Purvi Agarwal in Bengaluru; Editing by Angus MacSwan)