* Mexican Peso top weekly performer after surprise rate hike
* Czech crown, Hungarian forint also eye strong gains
* EM stocks up 1.4% this week, FX up 0.2%
* Argentina in focus as MSCI rescinds emerging market status
By Ambar Warrick
June 25 (Reuters) - Most emerging market currencies rose on Friday, and were set for a strong finish to a week marked by several interest rate hikes across the space as well as waning fears over immediate policy tightening by the U.S. Federal Reserve.
South Africa's rand rose 0.3%, leading gains across Europe, the Middle East and Africa (EMEA) as weak overnight U.S. data and the approval of an infrastructure spending bill brought down Treasury yields.
Lower U.S. Treasury yields make emerging market currencies look more attractive.
The MSCI's index of EM currencies rose 0.3%, and the equity index jumped 0.9%. Both were set to post gains for the week.
A bevy of Fed speakers this week appeared to have convinced markets that a recent spike in inflation would be transient, and that the bank would maintain its massive stimulus program for the time being.
Although the Fed appeared set to maintain an accommodative stance in the near-term, several EM central banks began hiking rates this month to stave off a post-COVID-19 spike in inflation.
Mexico's peso was the stand out performer this week after the central bank unexpectedly hiked rates to 4.25%. The currency surged 1.6% overnight and was set for a weekly gain of nearly 4%, the most among its EM peers.
"The peso is likely to remain supported, as a central bank that takes its inflation target seriously and behaves in a pro-active manner is positive for a currency," You-Na Park-Heger, FX and EM analyst at Commerzbank wrote in a note.
In Europe, Hungary's central bank was the first to kick off a hiking cycle, having raised rates by 30 basis points to 0.9%. The move put the forint on course for a near 2% gain to the dollar.
The Czech crown was set to add 1.1% this week after the central bank raised rates by 25 basis points to 0.50%.
Brazil's central bank beat its peers to the punch with a large rate hike last week, while hawkish minutes of the bank's meeting put the real on course for a more than 3% weekly gain.
In contrast, Philippine and Thai central banks held their interest rates as inflation stayed benign, which in turn weighed on the peso and the baht.
For the day, Russia's rouble lagged its peers as a possible summit between Moscow and European leaders appeared to have fallen through.
Argentine markets were in focus after MSCI said it will reclassify its Argentina index to Standalone Markets status, from Emerging Markets, citing issues over strict capital controls.
JPMorgan predicted $610 million of capital outflows from Argentina, due to the reclassification.
For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see https://tmsnrt.rs/2OusNdX
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For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see
(Reporting by Ambar Warrick; Editing by Amy Caren Daniel)