EM stocks snap three-day losing streak
Hungary central bank seen hiking rate by 100 bps to 12.75%
Rouble firms, Russian stocks rise after rout
By Bansari Mayur Kamdar
Sept 27 (Reuters) - Emerging markets currencies were subdued on Tuesday after four days of sharp losses as the U.S. dollar retreated from its 20-year peak, while Hungary's forint rose ahead of its rate decision.
The Hungarian forint climbed 0.2% against the euro ahead of a central bank decision at 1200 GMT when the National Bank of Hungary is expected to raise the key interest rate by 100 basis points to 12.75%, according to a Reuters poll.
Economists are expecting further hikes by the end of the year despite the bank flagging a possible halt to its increases.
The forint has lost over 9% this year and hit an all-time low of 416.90 per euro in July as Budapest is locked in a dispute with the EU's executive over rule of law issues that is blocking the disbursement of needed funds.
"They may also opt for a slightly lower rate hike of 75 basis points due to growing downside risk to the Hungarian economy and looking at what other central banks in the region have done," said Piotr Matys, senior FX analyst at In Touch Capital Markets.
The rate settlers in Budapest kick off a round of policy meetings in Central Europe where policymakers are seeking to end a cycle of interest rate hikes running since last year even as inflationary pressures remain and the world's major central banks keep pursuing higher rates.
The Central Bank of Nigeria and the Central Bank of Morocco also hold monetary policy meetings later in the day.
EM currencies that have been under pressure from a robust dollar were flat as the U.S. dollar index, slipped 0.1% to 113.72, pulling back from a two-decade peak of 114.58 on Monday.
MSCI's index of EM stocks gained 0.3%, snapping a three day losing streak.
"It's probably fair to say this is a short term correction," said Matys.
"The driving factors that have been setting the tone for the markets in the past few months are still in place, the Fed continues to raise interest rates and the war in Ukraine is likely to escalate."
Among other EM currencies, South Africa's rand firmed 0.6% in early trade.
In Russia, the rouble was 2% stronger against the dollar at 58.1, while rouble-based MOEX Russian index recovered 1.3%, stopping the rot after plunging to its lowest point since Feb. 24 in the previous session.
Russian stocks have slumped in the last week on fears of more sanctions against Moscow after President Vladimir Putin's partial military mobilisation order, while the currency has remained strong, supported by capital controls and a month-end tax period.
A softer dollar early in the day also boosted appetite for risk-sensitive Asian currencies, while Philippine shares dropped to their lowest level since October, 2020 on growing economic headwinds.
The World Bank said economic growth in East Asia and the Pacific will weaken sharply in 2022 due to China's slowdown, but the pace of expansion will pick up next year. For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX
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For RUSSIAN market report, see (Reporting by Bansari Mayur Kamdar in Bengaluru, editing by Ed Osmond)