(There will be no EMEA-focused emerging markets report on Jan. 1 because of New Year's Day holiday; Reuters will resume coverage from Jan. 2)
* Stocks set for yearly gains of ~7%
* FX on track for annual gain of ~5%
* China to be worst-performer across EM equities
* Hungarian forint, Polish zloty set for best year since 2012
Dec 29 (Reuters) - Emerging markets stocks and currencies, though subdued on the last trading day of 2023, were poised for annual gains as investors expect next year to bring reduced U.S. borrowing costs.
The MSCI's gauge of emerging market stocks was down 0.1% by 0943 GMT. The equity index is on track to snap a two-year losing streak and gain nearly 7% for the year, its best annual performance since 2020.
While a basket of currencies slipped 0.2% against the dollar, for the year the currencies index is set to log a nearly 5% gain, the most since 2017 and marking a recovery from last year's declines.
The dollar index, however, is set to fall about 2.1%, snapping a two-year winning streak.
The December quarter has been the best performing period this year for stocks and currencies index as the U.S. Federal Reserve's dovish stance, followed by positive economic data, pushed investor expectations for rate-cuts as early as March.
On the day, China's yuan rose to a seven-month high and was last seen at 7.1105 against the dollar.
China stocks rose, while Hong Kong shares were muted and set to end 2023 with yearly losses exceeding 10%, making the Chinese bourses the world's worst-performing major equity markets.
South Korea's annual consumer inflation eased for a second month in December and was below market expectations.
"Overall details suggest that a gradual moderation of CPI inflation should be in the pipeline," J.P.Morgan economists said in a note
Turkey's lira weakened 0.6% and was last at 29.5500 per dollar. It was set to log yearly declines of about 37%, making it among the worst performing emerging market currencies.
Turkey's central bank said it aims to increase the share of Turkish lira deposits to 50% in the banking system and to sustain the fall in the fx-protected deposit scheme in 2024.
Central and Eastern Europe currencies were little changed against the euro, while the Hungarian forint is set for an annual gain of 4%, its best year since 2012 and also snapping a six-year losing streak.
The Polish zloty is poised for yearly gains of nearly 8%, its best annual gain since 2012 and snapping a three-year losing streak.
The South African rand was steady, while the Russian rouble fell 1.3% against the dollar.
In South America, one of the most influential workers' unions in Argentina has called for a national strike next month as opposition to the government's overhaul of the economy builds.
(Reporting by Siddarth S in Bengaluru; editing by Barbara Lewis)
