London - A hot streak in central and eastern Europe kept emerging market stocks at a two-week high on Tuesday, but the Chinese yuan and Turkish lira remained under pressure from a US dollar at a nine-month high.
The benchmark emerging stocks index rose around 0.1 percent but lacked the impetus to drive higher, with investors reluctant to load up on riskier assets ahead of the U.S. Federal Reserve's meeting next week, and the US presidential elections on November 8.
“There's a lot of near-term event risk,” said Dominic Bunning, an emerging markets strategist at HSBC. “A lot of EM fundamentals have improved and the growth picture is looking a bit better in EM, but it's hard to make an aggressively bullish case for EM with the event risk around.”
Emerging Europe performed well, with Polish stocks up for a sixth day running, Hungary riding high and Russian dollar-denominated stocks up 0.6 percent.
But Asian markets were mostly in the red.
Korean stocks were amongst the biggest fallers, down 0.5 percent, after third-quarter data showed the economy would have grown faster if it had not been for the setbacks suffered by Samsung Electronics and Hyundai .
However, growth still exceeded forecasts.
The firm dollar was holding down currencies such as the Chinese yuan, which touched an all-time low in the 'offshore' market before stabilising after the deputy central bank governor said there was no basis for a continuous depreciation of currency.
The Turkish lira also slipped as much as 0.3 percent against the dollar, with Bunning saying there was still a concern amongst some investors that monetary policy might become too loose.
“Even though we had a rate hold last week, there's a concern that policymakers will push rates lower even if inflation picks up,” he said. An explosion in Turkey's southern resort city of Antalya is also likely to keep tourists away, adding to pressure on the current account.
Other currencies firmed, with the South African rand up 0.6 percent against the dollar after a strong show of support for Finance Minister Pravin Gordhan from business leaders and ruling ANC officials.
At least 80 heads of top South African firms want fraud charges against Gordhan to be dropped. Gordhan, who is due in court on November 2, has dismissed the charges as politically motivated.
The Russian rouble was also slightly firmer, helped by modest gains in oil prices and jump in metals.
With a central bank meeting underway, the Hungarian forint rose 0.16 percent against the euro, whilst Hungarian three- and five-year government bonds traded at record low yields .
The flying forint has retreated from 17-month highs over the past two weeks as the central bank has battled to rein in the currency by pumping liquidity into the banking system.
Investors are waiting to see if the central bank pledges further easing measures, although some analysts believe it is running out of options, as the forint is being driven by the strong current account surplus.
Budapest stocks were down around 0.1 percent, just off record highs.
REUTERS