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EM stocks down 0.57%, FX down 0.2%; set for weekly fall

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Czech CPI at 2.3% y/y in September

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Polish central bank governor still sees some space for

rate cuts

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Romania Q2 final GDP +0.3% y/y, in line with preliminary

estimate

By Nikhil Sharma

Oct 10 (Reuters) - Emerging Market assets fell on

Friday, setting up a negative end to a week dominated by

regional interest rate decisions and crucial data, alongside a

strengthening U.S. dollar due to shifting global political

dynamics.

The MSCI index of EM currencies slipped

0.2%, set for its fourth consecutive day of losses. For the

week, it was down 0.3%, dragged down by the dollar's climb this

week.

The greenback was on pace for its best weekly performance in

more than a year, helped by a falling yen, which reflected

expectations of increased fiscal spending in Japan after

hardline conservative Sanae Takaichi was elected prime minister.

Political uncertainty in France and a prolonged U.S.

government shutdown have also boosted the dollar's safe-haven

appeal, pressuring other currencies.

Analysts at ING noted the re-establishment of the dollar's

safe-haven value, but flagged the risk of corrections, adding

that "another rally would start to bring the greenback

dangerously far from what short-term rate differentials

justify."

A broader gauge for EM equities fell 0.6% on

Friday, taking its weekly losses to 0.4%, faltering after robust

gains in the previous week.

The Hungarian forint remained among the

worst-performing currencies for the week, down 0.54%

week-to-date, due to ongoing pressure from the government on the

central bank to lower borrowing costs from the European Union's

joint-highest 6.5% level.

However, the central bank has doubled down on current rate

levels, citing the need for full certainty on reaching its 3%

inflation target before adjusting interest rates.

The currency was flat on Friday. The local equity index

added 0.2% and was up 1% for the week.

In the Czech Republic, the currency crown rose

0.18% and Prague stocks jumped 0.35% after data showed

consumer prices remained unchanged at 2.3% on a yearly basis in

September, hovering slightly closer to the central bank's target

range.

Moves in local markets were largely dominated by an election

win for ANO leader Andrej Babis, whose populist policies,

including lavish spending for wage hikes and tax cuts, could

potentially trigger a wider budget deficit than the outgoing

government.

The currency fell 0.24% week-to-date, its worst week since

late May. The equities were little changed this week.

Polish stocks fell 0.5% on Friday and was flat for

the week despite a surprise quarter-point rate cut by the

central bank this week amid easing inflationary pressures.

While the central bank remains uncertain about its move in

November, it hasn't ruled out further policy easing going

forward. Polish currency zloty traded in tight ranges

throughout the week and dipped 0.19% WTD.

Romania's main stock index edged up 0.2% and has

gained 0.6% this week so far. The currency leu

remained quiet throughout the week.

Fresh data showed the economy grew 0.3% on the year in the

second quarter, in line with estimates, while foreign trade

deficit widened by 4.9% on the year to 21.946 billion euros in

January-August.

Persistent inflation continues to cloud the economy,

prompting the central bank to leave rates unchanged at 6.5% on

Wednesday. Price pressures were exacerbated by the expiration of

a government-imposed electricity price cap and by tax increases

introduced to narrow the European Union's widest budget deficit.

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