By Chris Vellacott
LONDON Tue Nov 4, 2014 5:50am EST
LONDON Nov 4 (Reuters) - Emerging stocks and currencies mostly slipped on Tuesday, pressured by dollar strength and more evidence of slowing Chinese growth, while a renewed flare-up in geopolitical tensions knocked Ukrainian dollar bonds.
MSCI's emerging stocks index dropped by 0.2 percent while the Asian benchmark index, which excludes Japan, fell by a similar amount as the dollar stayed just off four-year highs against a basket of major currencies.
A rising dollar puts pressure on emerging market assets as the promise of better returns for relatively low risk lures many investors to take their money to the United States.
"The stronger dollar and possibility of higher U.S. interest rates clearly are negative for emerging markets. These are the two crucial variables for the market now and they are beyond the control of emerging markets," said Cristian Maggio, a strategist at TD Securities in London.
Korea's won and the Malaysian ringgit both hit nine-month lows against the greenback , with the former also flirting with new six-year lows against the yen, close to levels where the central bank tends to intervene.
South Korea's finance minister said on Tuesday the government was concerned about yen weakening and would continue market-stabilising efforts after the Bank of Japan decided to expand its massive stimulus last week.
Also weighing was news that China's factory activity unexpectedly fell to a five-month low in October as firms fought slowing orders and rising costs in the cooling economy.
However some currencies enjoyed slight relief as the dollar eased off four-year highs hit on Monday, with the rand and lira rising 0.3 and 0.4 percent respectively .
Russia's rouble weakened 0.3 percent to the dollar as local markets remained shut. The currency is close to all-time lows, with fresh pressure coming from elections in rebel-held eastern Ukraine that threatened to jeopardise a two-month long ceasefire.
The cost of insuring Russian debt exposure rose with 5-year credit default swaps (CDS) at 259 basis points, compared with 253 bps a day earlier, according to Markit.
Ukrainian President Petro Poroshenko called an emergency meeting of his security chiefs for Tuesday to discuss new ways of dealing with the separatist challenge in the east after rebel elections.
Ukraine's yield spreads over U.S. Treasuries widened by 21 basis points on the EMBI Global bond index of emerging debt to 1038 bps. Dollar bonds maturing in 2022 fell 1 cent in the dollar while five-year rose 5 bps to 1220, according to Markit.
Ukraine's 2017 and 2023 bonds also fell 0.5 cent and 0.75 cent respectively.
"The rebel-sponsored 'elections' in the Ukrainian Donbass region have resulted in President Poroshenko saying he is going to revoke the autonomy status law for the rebel-held areas, which essentially means that the Minsk ceasefire agreement is also now on tenterhooks," Commerzbank analysts said in a note
In Central Europe, Romania's leu was 0.15 percent weaker versus the dollar ahead of a central bank rate-setting meeting. Analysts expect policymakers to shave another quarter point off interest rates and bring them to a new record low of 2.75 percent. <ID:nL6N0S31DC>
The zloty firmed moderately versus the dollar to stand just off two-year lows and it was flat to the euro as the central bank entered a two-day policy meeting.
For GRAPHIC on emerging market FX performance 2014, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2014, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2014, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2014, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see ) (Editing by Andrew Heavens)
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