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EM FX flat, stocks down 0.1%

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U.S. Federal Reserve rate decision due on Wednesday

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Slovakia's credit rating downgraded to A3

By Pranav Kashyap

Dec 16 (Reuters) - Emerging market currencies were

little changed on Monday as investors awaited the U.S. Federal

Reserve's rate decision this week, while disappointing data from

China dented Asian markets.

China's retail sales climbed only 3% year-on-year in

November, falling short of the expected 4.6% increase, keeping

alive calls for Beijing to ramp up consumer-focused stimulus as

policymakers brace for more U.S. trade tariffs under a second

Trump administration.

In response, emerging stocks in Asia fell. China's CSI300

declined, closing down 0.5%, and the Shanghai

Composite index edged lower by 0.2%.

The economic slowdown in China, the world's second-largest

economy, has put pressure on emerging market assets this year,

despite the Federal Reserve beginning to ease interest rates.

On a medium to long-term basis, emerging markets like Africa

"will bear the brunt of any extreme measures that Trump pulls on

China", said Charlie Bird, FX trader at Verto.

"China seems to be well invested into Africa and they can't

pull it all out overnight. It would probably be a gradual move,"

Bird added.

The dollar index remained steady at 106.88, with

market participants eagerly awaiting the U.S. Federal Reserve's

interest rate decision on Wednesday. A 25 basis-point cut is

expected, though the focus will be on future guidance into 2025,

where a more cautious pace of cuts is anticipated.

According to CME's FedWatch tool, officials are expected to

forgo a cut in January, it turn lifting the dollar.

By 0957 GMT, the MSCI EM equities index slipped

0.1%, while an index tracking currencies was

flat.

In Europe, Slovakia faced a credit rating downgrade to A3

from Moody's late Friday, citing "broad institutional challenges

amid political tensions". However, the outlook was revised to

stable.

Slovakia's Finance Ministry criticised the downgrade as a

misinterpretation of the political landscape.

Elsewhere, Hungary's forint remained largely

unchanged against the euro, with eyes on the central bank's rate

decision on Tuesday.

The Budapest SE index slipped 0.2%, while Poland's

benchmark ticked up 0.1%.

Poland's zloty held its ground ahead of the

central bank's core inflation data release at 1300 GMT.

In Africa, Senegal projected a budget deficit of around 7%

of GDP in 2025, down from a previous audit-revealed 10%, which

had led to a freeze on its $1.9 billion IMF program.

Ghana's President-elect John Dramani Mahama said he will not

abandon the country's $3 billion rescue package with the

International Monetary Fund, but wants to review the deal.

In Israel, inflation dipped to 3.4% in November but stayed

above target, unlikely to prompt a rate cut from policymakers in

the near future. The benchmark index gained 0.5%.

Meanwhile, India's private sector output grew at the fastest

rate in four months, according to preliminary flash PMI data,

providing a positive close to 2024. The rupee remained

flat.

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