* Profit-taking after emrg shares, bonds hit 11-month high
* Israeli shekel sees biggest one-day fall
* Turkish debt rallies on rate hopes
By Sebastian Tong
LONDON, Aug 4 (Reuters) - Emerging assets pared gains on
Tuesday that had taken them to their strongest levels since
September, although a raft of earnings and stronger evidence of
a global economic recovery supported sentiment.
Israel's shekel currency took its biggest one-day drop in
nearly five months while Turkey's benchmark Eurobond rallied to
a record high on rising expectations of further rate cuts.
After rising in 13 out of the previous 15 sessions, emerging
equities <.MSCIEF> had slipped by 0.5 percent by 1045 GMT.
Profit-taking shaved 0.6 percent off South African shares
<.JTOPI> taking them off 11-month highs while Czech <>,
Polish <>, Hungarian <> and Romanian <> shares
also eased from recent 10-month peaks.
Israeli shares <>, which have gained some 47 percent
since the start of the year, slipped 0.8 percent, edging down
from the 11-month high they hit in the previous session.
Turkish shares <> retreated 0.6 percent after hitting
their highest level in 17 months earlier in the session.
Emerging sovereign debt <11EMJ>, which rallied to its
strongest levels in 11 months, traded 1 basis point wider to 366
bps over U.S. Treasuries.
"There is an evident need for correction and this is what's
happening ... But taken in the context of recent gains, these
moves have been quite small so far. Sentiment is still good,"
said Bartosz Pawlowski, emerging markets strategist at BNP
Paribas.
Though moves by China's banking regulator to tighten bank
capital rules cast a shadow, confidence that the economic
recovery was gaining a firmer footing was bolstered by signs
that global factory activity had further stabilised in July
[] []
Brazil's central bank head said the country, one of the
world's major emerging economies, may have gotten out of
recession and could be poised for growth by the end of the year.
[]
Meanwhile, BNP Paribas <BNPP.PA> and Swiss bank UBS
<UBSN.VX> joined the roster of banks that have signalled
improved prospects for financial markets.
TURKISH DEBT RALLIES
High-yield currencies backed off recent multi-month peaks.
The Polish zloty <EURCZK=> and Hungary's forint <EURHUF=>,
which both advanced to a 7-month high against the euro in the
previous session, fell some 1 percent against the common
currency.
The Israeli shekel <ILS=> fell by 2 percent after hitting an
eight-month high versus the dollar in the previous session.
The Bank of Israel was said to have exceeded its usual $100
million daily foreign currency purchase, adding to pressure on
the shekel. []
On Monday, the central bank said it would widen its
intervention in the foreign exchange market with purchases above
a programme of $100 million a day in the event of "unusual
movements in the exchange rate." []
Citi said the Bank of Israel's statement could be
interpreted as its attempt to dispel the impression that the
shekel is a "one-way bet".
"(But) the Bank is still facing something of a dilemma:
inflationary pressures will argue for tighter monetary
policy, but aggressive forex intervention constitute a loosening
of policy. For this reason, we believe it will be difficult for
the Bank entirely to shake off the "one-way bet" argument," Citi
said in a note.
Turkey's lira shed early gains to back down from 10-month
highs against the dollar. <TRY=>
The country's central bank said it saw limited rises in
inflation in the coming months. [] Expectations of
easing interest rates drove the yield on Turkey's benchmark 2030
dollar bond to a record low <TRGLB30=RR>.
Demand for Turkish debt also drew over $30 billion in bids
at an auction of three local bonds, said Simon Quijano-Evans,
emerging markets strategist at Cheuvreux.
"Markets have woken up to the fact that the (central bank)
is going to continue cutting rates," he wrote in a note.
(Reporting by Sebastian Tong; Editing by Ruth Pitchford)
