EMERGING MARKETS-EM FX, stocks on track for quiet end to week amid geopolitical jitters

By Purvi Agarwal

Feb 20 (Reuters) - Most emerging market currencies and stocks were on track to end the week with little changes on Friday, as escalating geopolitical tensions instilled caution in investors while they await a crucial inflation reading in the U.S.

MSCI's index tracking global EM currencies .MIEM00000CUS was flat on the day, and on track to end practically steady for the week. The stocks equivalent .MSCIEF inched slightly higher and was set for marginal weekly gains.

Moves in EM assets have largely been muted this week as major Asian markets such as mainland China, Taiwan and Hong Kong, as well as Brazil in Latin America, were shut for holidays and geopolitical tensions dented the appetite for risk assets.

All eyes will be on the U.S. Federal Reserve's preferred inflation report later in the day that could shed more light on the central bank's interest rate trajectory, and set the tone for markets heading into the weekend.

IMPACT SEEN IN OIL, DOLLAR MARKET

U.S. President Donald Trump warned Iran on Thursday it must make a deal over its nuclear program or "really bad things" will happen, and set a deadline of 10 to 15 days. Tehran threatened to retaliate against U.S. bases in the region if attacked.

The impact would first be felt in the oil market, where the commodity is headed for its first gain in three weeks on the simmering tensions.

"The rise in US-Iran tensions has wiped out most other market drivers and lent USD support amid higher oil prices ... (The dollar's) safe‑haven appeal is generally diminished, but is fully restored when geopolitical tensions trigger oil shocks," said Francesco Pesole, FX strategist at ING.

"If there are no new developments on Iran today, data surprises could have some impact."

Peace talks between Russia and Ukraine also ended abruptly this week with no breakthrough this week, slashing hopes of an end to the four-year-old war.

Reuters reported that Ukraine could export several billion dollars worth of military goods and services this year after authorising its first wartime foreign sales.

The International Monetary Fund on Thursday said its board would review a staff-level agreement on an $8.1 billion lending program for Ukraine in coming days.

South Africa's rand ZAR= gained 0.3% against the dollar on Friday, but was set for its biggest weekly fall since November. Stocks .JTOPI gained 0.8%, helped by gold miners as prices of the bullion inched higher.

Turkey's lira TRYTOM=D3 lost 0.2% while stocks .XU100 were marginally higher.

Most currencies in emerging Europe were subdued against the euro. Hungary's forint EURHUF= slipped 0.4%.

Stocks in the region were mixed, with ones in Romania .BETI up 0.7%, and ones in Poland .WIG20 and Hungary .BUX flat.

Fitch is scheduled to review the credit rating for the Democratic Republic of Congo.

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