EMERGING MARKETS-Emerging Markets assets set for weekly loss amid strong dollar

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 .MIEM00000CUS 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 .MSCIEF fell 0.6% on Friday, taking its weekly losses to 0.4%, faltering after robust gains in the previous week.

The Hungarian forint EURHUF= 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 .BUX added 0.2% and was up 1% for the week.

In the Czech Republic, the currency crown EURCZK= rose 0.18% and Prague stocks .PX 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 .WIG20 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 EURPLN= traded in tight ranges throughout the week and dipped 0.19% WTD.

Romania's main stock index .BETI edged up 0.2% and has gained 0.6% this week so far. The currency leu EURRON= 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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