EMERGING MARKETS-EM assets trip on Fed independence fears; Hungary, Poland rate decisions due

By Pranav Kashyap

Aug 26 (Reuters) - Most emerging market assets retreated on Tuesday as President Donald Trump took fresh aim at the Federal Reserve, rattling sentiment ahead of rate decisions in Hungary and Poland.

Hungarian equities .BUX fell 0.3% and the forint EURHUF= slid 0.7% to a near three-week low ahead of a widely expected hold from the central bank, as inflation was still running above its 2%–4% band against the backdrop of a sputtering economy.

"There is no discussion of rate cuts here at present... the market will be watching for any changes in guidance," said Frantisek Taborsky, EMEA FX & FI strategist at ING.

Geopolitical strains, trade tensions, and weaker growth projections for 2025–2026 have fostered caution across the region.

In Poland, Warsaw stocks .WIG20 hit a three-week low and the zloty EURPLN= touched a two-week low as markets braced for the central bank's decision.

Both central banks face delicate trade-offs. Hungary was prioritizing inflation control and currency stability with higher rates, while Poland has adjusted policy more gradually and signaled one more cut could be on the table this year.

Meanwhile, global sentiment soured after Trump said he was firing Fed Governor Lisa Cook, a fresh jab that further undermines confidence in the Fed's independence and U.S. assets.

There were some bids into safe havens as the news muddied the policy outlook and stoked uncertainty over a rate cut next month. Gold XAU= hit a two-week high, while the dollar =USD pared losses after an initial drop.

EM currencies and stocks fell across the board, with stocks in the Philippines .PSI tumbling more than 2% to their lowest level since April 23.

"In the short term, the market appears crowded. Recent moves have largely been reactionary to individual events or data releases," said Daniela Hathorn, senior market analyst

at Capital.com.

"Yet these gains tend to fade as the market resets, underscoring the lack of sustained momentum. This split picture leaves investors uncertain about whether to lean toward risk assets like equities... or to seek safety in gold."

Meanwhile, Indian equities .BSESN, .NSEI shed 0.6%, and the rupee INR= hit a near one-month low after a U.S. Homeland Security notification confirmed Washington will impose an additional 25% tariff on all Indian-origin goods from Wednesday.

The Russian rouble RUB= rose 0.5% while some of Ukraine's international dollar bonds ticked up.

U.S. Secretary of State Marco Rubio spoke with his European counterparts on Monday and discussed diplomatic efforts to bring an end to the war in Ukraine.

Elsewhere, the South African rand ZAR= slipped 0.3%, while stocks in Johannesburg .JTOPI fell 0.7%. Data showed the leading business cycle indicator rose 0.4% month on month in June.

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