EMERGING MARKETS-EMEA FX muted; Hungarian c.bank meeting awaited

Emerging market currencies in Europe, Middle East and Africa were muted on Tuesday as growing coronavirus cases and the lead-up to the U.S. presidential election weighed on sentiment, while the Hungarian forint was flat ahead of a central bank meeting.

Emerging market currencies in Europe, Middle East and Africa were muted on Tuesday as growing coronavirus cases and the lead-up to the U.S. presidential election weighed on sentiment, while the Hungarian forint was flat ahead of a central bank meeting. Weakness in oil markets saw Russia's rouble leading losses in the region while the Polish zloty lagged central European peers, as both countries saw an infection surge.

The Hungarian forint retreated slightly against the euro ahead of a central bank meeting, where it is expected to hold interest rates after weaker-than-expected September consumer prices data eased some inflation concerns. Still, inflation levels are well above the central bank's target, as it kept a dovish stance due to the pandemic.

"While the markets would likely view quantitative easing as normal and acceptable at this time, it is not clear that the market would welcome easier monetary policy as a long-term growth driver, in a country where core inflation is running above the inflation target," Tatha Ghose, FX & EM analyst at Commerzbank, wrote in a note. "The resultant weak forint exchange rate is not a problem at this time, but it will be once the corona shock has faded."

Hungarian stocks were flat, with the MSCI's index of emerging market equities reflecting a similar trend. Chinese stocks lent some support to the benchmark as optimism over strong consumption in the country invited some buying into risk-linked assets.

Most stock indexes in EMEA tracked weakness in Wall Street as Washington lawmakers still appeared to struggle to reach agreement on stimulus ahead of a Tuesday deadline. Surging coronavirus cases across Europe also weighed on sentiment as they raised the chances of fresh curbs on social and business activity.

Markets were now looking to central bank decisions from Russia and Turkey later in the week. For GRAPHIC on emerging market FX performance in 2020, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see https://tmsnrt.rs/2OusNdX

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