EMERGING MARKETS-EM stocks slip, FX down on stronger dollar; Polish rate verdict in focus

By Nikhil Sharma

Oct 8 (Reuters) - Emerging market stocks and currencies fell on Wednesday in a busy day packed with regional data releases in Eastern Europe and an upcoming interest rate decision in Poland.

The MSCI index of EM currencies .MIEM00000CUS fell 0.3%, extending the previous session's losses, dragged by a stronger U.S. dollar, stemming from the government shutdown in the United States and expectations of increased fiscal spending in Japan.

A parallel gauge for EM equities .MSCIEF dropped 0.56%, pulling back after strong gains in recent trading sessions.

The National Bank of Poland (NBP) is expected to hold its interest rate later today, reflecting the central bank's cautious, data-dependent stance.

"The decision will be a close run, with the market split between a rate cut and a hold. We expect the central bank to keep the policy rate unchanged at 4.75%," analysts at Danske Bank said in a note.

"Governor Glapiński has indicated a 'cautious will' within the Board to cut rates further, and we expect at least one more cut during Q4."

The bank cut its main interest rate by 25 basis points last month, citing a decline in inflation.

Polish zloty EURPLN= was flat, while Warsaw stocks .WIG20 slipped 0.2%.

The Hungarian forint EURHUF= remained under pressure, down 0.25%, amid renewed government pressure to cut borrowing costs despite the central bank's doubling down on its strict monetary policy.

The currency had fallen nearly 1% in the previous session - its worst single-day drop since April 11. On Monday, Prime Minister Viktor Orban said Hungary's main rate, currently at the European Union's joint-highest level, was "higher than it could be."

Fresh data revealed inflation kept steady outside the central bank's tolerance band in September, creating an obscure outlook for future policy decisions. The country's main stock index .BUX was up 0.45% on Wednesday.

The Czech crown EURCZK= and the country's main equity index .PX remained steady for the day. Fresh data showed the country's unemployment rate was steady at 4.5% in September, while retail sales grew 3.5% year-on-year in August, beating expectations.

Despite benign data, concerns about fiscal indiscipline mounted after ANO leader Andrej Babis, who won the recent parliamentary election, flagged a potentially wider budget deficit than the outgoing government.

The populist ANO leader ran his campaign promising lavish government spending to raise wages, cut taxes, and accelerate growth - measures that would cost billions of euros.

Elsewhere in Emerging Markets, Vietnam's stocks .VNI closed at a record high after investors cheered FTSE Russell's announcement that the country was set to be upgraded to emerging market status.

Additionally, FTSE Russell reclassified Greece from advanced emerging to developed market status, effective September 21, 2026. The country's main stock index .ATG jumped 1.2% to a more than one-month high.

Egypt was added to a watch list for a downgrade to frontier market status from secondary emerging market status, while Nigeria was slated for a possible upgrade to frontier status from its current unclassified status.

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