EMERGING MARKETS-Emerging stocks hover at 3-mth high, forint in focus

By Sujata Rao

LONDON, Sept 19 (Reuters) - Emerging stocks seesawed around three-month lows on Tuesday and currencies were mostly flat, including Hungary's forint which hit a two-month low against the euro the previous day in expectation of more monetary policy easing.

The dollar eased against a basket of currencies before the start of a two-day meeting of the U.S. Federal Reserve, which is likely to say that it will soon start paring its balance sheet. But with Treasury yields close to one-month highs, emerging assets failed to make much headway.

MSCI (Frankfurt: 3HM.F - news) 's emerging equity index slipped 0.2 percent while average sovereign dollar bond yields over Treasuries widened 1 basis point (bp) to 286 bps, standing just off three-year lows.

The focus is on Hungary's central bank which is expected to leave main interest rates on hold but ease policy by cutting a deposit cap or cutting the -0.05 percent overnight deposit rate deeper into negative territory.

It may also signal more delays to meeting inflation targets.

Authorities' dovishness - policymakers said earlier this month they could use unconventional easing tools to meet inflation targets - drove the forint to two-month lows versus the euro, while pushing it down 2 percent against the Polish zloty in the past three weeks .

Hungary's segment of the GBI-EM of local currency bonds has seen yields slump to record lows of around 1.58 percent , about 80 bps below March levels, while stocks have hit successive record highs for year-to-date gains of over 20 percent.

"The central bank did reiterate that they would ease policy unconventionally afresh so the forint began to underperform the zloty. That happened because the central bank introduced unknown event risk," said Tatha Ghose, senior emerging markets economist at Commerzbank (Xetra: CBK100 - news) .

There was also the possibility of an entirely different new easing tool, Ghose said, adding: "That's a bit unknown and why you have seen the forint underperform the zloty over the past month."

ING Bank predicted the forint would dip below 308 per euro "as the delivery of a cut in the deposit rate would signal to the market that the NBH means business and is indeed not running out of firepower".

"We expect upward pressure on zloty/forint to continue as the cross shows extremely high sensitivity to the NBH policy stance," the bank's analysts said.

Elsewhere, the South African rand was flat, steadying near one-month lows hit on Monday after the tax agency's attack on auditor KPMG for withdrawing a report on former finance minister Pravin Gordhan's investigations into businessmen close to President Jacob Zuma.

In Dubai, shares in Dana Gas rose 2.5 percent ahead of the opening of a trial in London over the company's non-payment of a $700 million sukuk.

In bond news, Ukraine raised $3 billion on Monday in its first sovereign debt sale since its 2015 restructuring.

For GRAPHIC on emerging market FX performance 2017, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see http://tmsnrt.rs/2dZbdP5

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley (Xetra: 885836 - news) Emrg Mkt Indx 1109.34 -3.58 -0.32 +28.65

Czech Rep 1048.31 -0.71 -0.07 +13.75

Poland 2508.65 +6.90 +0.28 +28.79

Hungary 38309.62 -77.60 -0.20 +19.71

Romania 8008.60 +12.63 +0.16 +13.04

Greece 755.23 -5.56 -0.73 +17.34

Russia 1110.01 -9.13 -0.82 -3.67

South Africa 49483.45 -253.09 -0.51 +12.71

Turkey 06183.70 -350.90 -0.33 +35.89

China 3356.65 -6.20 -0.18 +8.15

India 32472.00 +48.24 +0.15 +21.95

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2017

Czech Rep 26.11 26.12 +0.03 +3.45

Poland 4.29 4.29 +0.04 +2.66

Hungary 309.20 309.25 +0.02 -0.12

Romania 4.60 4.60 -0.08 -1.40

Serbia 118.81 118.90 +0.08 +3.82

Russia 58.16 58.08 -0.13 +5.33

Kazakhstan 340.87 339.87 -0.29 -2.12

Ukraine 26.13 26.11 -0.08 +3.33

South Africa 13.32 13.30 -0.14 +3.09

Kenya 103.25 103.05 -0.19 -0.85

Israel 3.52 3.52 +0.00 +9.27

Turkey 3.50 3.49 -0.31 +0.81

China 6.58 6.57 -0.18 +5.45

India 64.19 64.15 -0.06 +5.85

Brazil 3.14 3.14 -0.01 +3.73

Mexico 17.80 17.76 -0.21 +16.40

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 308 1 .02 8 06.70 1

All data taken from Reuters at 08:43 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.

(Reporting by Sujata Rao and Claire Milhench; Editing by Hugh Lawson (Frankfurt: 502337 - news) )