* Equities set for weekly loss, but up over 2 pct in Oct.
* Hungary's forint up; Polish zloty and Czech crown retreat
* South African bonds and currency firm
By Michel Rose
LONDON, Oct 29 (Reuters) - A volatile dollar and uncertainty
over the scope of expected U.S. monetary stimulus kept emerging
assets in the red on Friday, though equities looked on track to
post their second successive month of gains.
Emerging stocks were down 0.3 percent by 1110 GMT, set for a
second weekly drop, and the Thomson Reuters Emerging Europe
index <.TRXFLDEEPU> was down 1 percent.
Still, after gaining almost 11 percent in September, the
biggest monthly rise in 16 months, emerging stocks have risen 2
percent this month and are hovering near two-year highs.
"Markets are captive of euro/dollar fluctuations. We are
seeing a turnaround of euro/dollar and that is bringing emerging
markets down across the board," said Luis Costa, head of CEEMEA
strategy at Citigroup.
The euro fell 0.2 percent to $1.3895 <EUR=> after a 1.2
percent jump overnight as markets continued to ponder the
magnitude of a new bout of quantitative easing the U.S. Federal
reserve is expected to announce when it meets on Nov. 2-3.
"Markets will be very nervous ahead of the Federal Open
Market Committee (FOMC) next week. We are also seeing (euro
zone) peripherals widening. All the different messages in the
market don't bode well for today's trading," Costa added.
Emerging stocks were broadly in negative territory as
investors were cautious ahead of U.S. third-quarter GDP data,
due later on Friday, and next week's Fed meeting.
Czech equities <> were the biggest losers, down 1.37
percent, dragged lower by disappointing results from Austria's
Erste Bank <>. []
Hungarian stocks <> slipped nearly 1 percent while
Romania's benchmark index <> was down 0.8 percent and
Polish equities dipped 0.2 percent.
Russian shares <> were down for the fourth session in a
row and South African stocks <.JTOPI> were 0.3 percent lower.
The Turkish bourse was closed for a national holiday.
ZLOTY DOWN, RAND HIGHER
In the currency market, the Hungarian forint <EURHUF=> was
steady while investors awaited full details of Budapest's budget
plans for next year.
Its recent proposals to raise taxes from different sectors
of the economy have already caused jitters in the market.
The Polish zloty <EURPLN=> extended losses after the central
bank disappointed some market players this week by leaving
interest rates unchanged.
"A lot of investors will have to now reassess their
expectations for rate hikes in the coming months after the
undisputedly dovish (Polish central bank) statement from two
days ago," said BNP Paribas analysts in a research note.
The Czech crown <EURCZK=> and the zloty were on track for
their first monthly declines since June.
The Romanian leu <EURRON=> held steady as investors awaited
the conclusion of an IMF mission to Bucharest, due on Nov. 1.
Central European bond markets were also stable in thin
trade, ahead of Polish November debt supply details due later in
the day. Emerging sovereign debt <11EMJ> tightened 2 basis
points to 240 bps.
Albania on Thursday sold its first-ever Eurobond, raising
300 million euros. That brought year-to-date emerging sovereign
supply to $71 billion, according to JP Morgan data, or just 10
percent below their full year issuance forecast.
The South African rand <ZAR=D3> firmed a touch, supported by
inflows into the fixed income market, with foreign buying of
South African bonds up nearly five-fold so far this year.
[]
"We believe South Africa will cut rates one more time and
that's sucking a lot of international flows into South African
bonds and supporting the currency," Citi's Costa said.
(Additional reporting by Sujata Rao; Editing by Susan Fenton)
