EMERGING MARKETS-EM stocks rise, Czech crown slips as central bank verdict looms

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EM stocks up 0.4%, FX down 0.17%

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Czech central bank rate decision due at 1230 GMT

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Russia to raise VAT to fund military expenditure

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Indian rupee flat near record lows

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Trump to support Argentina, World Bank to accelerate support

By Nikhil Sharma

Sept 24 (Reuters) - A gauge of emerging market stocks hit a four-year high on Wednesday, while the Czech crown slipped as investors awaited an interest rate decision by the central bank amid speculation of a hawkish monetary policy outlook.

MSCI's index tracking emerging market equities rose 0.38%, reaching its highest since July 2021. A parallel gauge for currencies dipped 0.17%.

The Czech crown and Prague equities edged down as investors turned cautious ahead of the Czech National Bank's policy decision, with economists expecting a "hold" verdict.

Inflation that still lingers above the central bank's target and hotter real wages growth have boosted speculation that the central bank may signal a prolonged hold in policy.

"The Czech koruna has performed really well so far this year. The risk is that we see institutional investors already positioned quite heavily in the currency, especially since there are still some inflows into the currency," said Tim Graf, head of EMEA macro strategy at State Street.

Local markets are also positioned for volatility as the country's parliamentary elections approach, with opinion polls favouring the opposition ANO party of former Prime Minister Andrej Babis. Voting will take place on October 3 and 4.

In Hungary, the forint fell 0.4%. The main equity index declined 0.64% following the central bank's decision on Tuesday to leave its base rate unchanged at the European Union's joint-highest level of 6.5%.

The widely-expected move was accompanied by guidance on maintaining tight monetary conditions to curb inflation, which is projected to be higher in the 2026 election year.

Polish stocks dropped 1.2% - set for their sixth loss in the last seven trading sessions. The zloty was down 0.27%.

Elsewhere, the Russian rouble weakened 0.1% as the government was set to submit its draft budget to parliament on September 29. The key market event could see potential tax hikes as Russia struggles to make financial ends meet in the fourth year of the war in Ukraine.

The finance ministry said it planned to raise the rate of value-added tax to 22% from 20% from 2026 to fund military expenditure.

In an abrupt change in tone, U.S. President Donald Trump shifted his stance on Ukraine, expressing confidence that Kyiv could retake all territory occupied by Russia, citing Russia's "big" economic problems.

Ukraine's international bonds were steady.

In South Asia, the Indian rupee was flat amid likely intervention by the central bank after a steep rise in fees for U.S. H-1B visas dragged the currency to record lows.

"Given the current situation, one should expect the Indian rupee to weaken, though the pace of weakening may slow over time," Prateek Agarwal, MD and CEO, Motilal Oswal AMC, told Reuters Trading India forum.

In Latin America, heightened volatility in Argentine markets put the economy in the spotlight. On Tuesday, the country's international bonds and the peso extended gains after Trump voiced support for his Argentine counterpart, Javier Milei.

Additionally, the World Bank pledged to deploy $4 billion in the coming months to back the South American nation's reform agenda.

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For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Nikhil Sharma. Additional reporting by Shubham Batra. Editing by Mark Potter)