Updated at 0935 GMT

By Johann M Cherian

July 9 (Reuters) -Most emerging markets currencies were little changed on Tuesday, but Hungary's forint fell for the second day after the government announced new tax policies, while focus shifted to Kenyan assets following a credit rating downgrade.

MSCI's index tracking developing markets equities .MSCIEF added 0.3%, while an index tracking foreign exchange .MIEM00000CUS was flat against the dollar.

In central and eastern Europe, Hungary's forint EURHUF= weakened 0.4% against the euro, extending Monday's drop after the local government unveiled taxes on firms in an effort to balance the budget, where the deficit averages nearly 7% of economic output for the past four years.

"This could cover the fiscal risk we saw earlier and the current official target of a 4.5% of GDP government deficit could be achieved. This is particularly good news for Hungarian government bonds (HGBs) and issuance in the rest of the year," said Frantisek Taborsky, EMEA FX & FI strategist at ING research.

Separately, data showed domestic inflation in June was softer than economists were expecting.

Most other currencies in the region were little changed.

In Africa, yield on Kenya's dollar bond KE235478161= maturing in 2034 ticked up over 10 basis points (bps) after Moody's cut the east-African nation's sovereign rating deeper into junk territory.

Bond prices slid in June after the country's President William Ruto bowed to pressure and failed to introduced tax hikes as part of the International Monetary Fund's process to economic stability.

Moody's believes the spending cuts that Ruto opted for instead could make the Kenya's debt affordability to remain weaker for longer.

Meanwhile, yield on Chinese bonds across the board CN2YT=RR, CN5YT=RR, CN10YT=RR, CN30YT=RR dipped between 2 and four basis points (bps), while the yuan CNY=CFXS was little changed with focus on a possible central bank intervention in the bond market.

A Reuters poll showed China's new yuan loans likely more than doubled in June from May, as the regulator kept up policy support for the economy, ahead of the 'Third Plenum' meeting between July 15-18, where markets expect more reforms.

In south Asia, Sri Lanka's rupee LKR= inched up 0.1% against the dollar, while yield on dollar bonds maturing in 2030 rose 42 (bps). Its foreign minister said it will wrap up talks with international bondholders on restructuring $12.5 billion in debt within a few weeks.

Separately, the island nation's parliament is expected to vote on an amendment that will allow Elon Musk's Starlink, the satellite unit of SpaceX, to set up operations.

Later in the day, investors will parse U.S. Federal Reserve chair Jerome Powell's comments for any clues on the central bank's outlook for monetary policy.

Reporting by Johann M Cherian in Bengaluru; Editing by Arun Koyyur

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