Colombia's peso falls after rate hike; EM stocks eye fifth weekly gain

Colombia's peso dipped after its central bank delivered a smaller-than-expected interest rate hike, while emerging market stocks EEFS were subdued following a drop in Indian shares.

Stocks were flat by 1918 GMT but still on track to post their fifth straight weekly gain.

"Despite the recent rally, we believe that emerging markets' outperformance has further to run," Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a note.

"We expect EM stocks to deliver mid- to high-single-digit positive returns this year, and the MSCI EM index to end the year at 1,100, led by China’s economic reopening and the positive spillover effect into other emerging markets."

Emerging market debt and equity saw their strongest inflows in almost two years, averaging $7.1 billion over the last four weeks, data from BofA Global Research showed.

Limiting gains on the broader index, Indian shares fell as Adani Enterprises' ADANIENT stock plunged after a scathing report by a U.S. short seller sparked a selloff in the conglomerate's listed firms and cast doubt on the success of the company's record $2.45 billion secondary share sale.

In Latin America, the Colombian peso USDCOP fell 1% against the dollar, but was still on track for its third straight weekly gain.

Colombia's central bank board raised the benchmark interest rate by 75 basis points to 12.75% on Friday, a softer increase than expected by a majority of analysts as the board grapples with high inflation.

Chile's peso USDCLP slipped 0.5% after the Andean nation's central bank on Thursday maintained its benchmark interest rate overnight at 11.25%, as expected.

The Brazilian real USDBRL, (BRBY) fell 0.8%.

Brazil Treasury Secretary Rogerio Ceron on Friday said the Finance Ministry will propose a neutral tax reform, meaning the government does not intend to raise taxes, while economists debate the improbability of Brazil achieving fiscal balance without them being increased.

"Local investors in particular remain very sceptical of Finance Minister Fernando Haddad’s promise to reduce government spending and cut the fiscal deficit," Elizabeth Johnson, managing director of Brazil Research and Wilson Ferrarezi, economist at TS Lombard wrote in a note.

"If the administration approves the tax reform, it will send a positive message to investors."

The Peruvian sol USDPEN was flat. Peruvian President Dina Boluarte said on Friday she was considering moving up general elections to later this year, as the Andean leader struggles to stem protests demanding her resignation.

MSCI's index for Latin American currencies (.MILA00000CUS) dipped 0.2% while the broader emerging markets currencies index (.MIEM00000CUS) was muted.

Latin American stock indexes and currencies at 1918 GMT: