* MSCI EM stocks index at highest since May 2018
* Hungarian forint leads gains across CEE FX
* China's yuan at 28-month high
By Ambar Warrick
Nov 5 (Reuters) - Russia's rouble suffered on Thursday while China's yuan and emerging market stocks scaled multi-year highs as Joe Biden moved closer to victory in a tight U.S. election race.
Democrats are unlikely to win the Senate, however, and markets were trying to assess the implications of a potential U.S. policy gridlock. markets that might suffer from a Biden win nursed some losses. Russia's rouble RUB= slipped as much as 1.5% before paring back some losses to trade 0.2% lower against a softer dollar =USD , with a fall in oil prices adding to the pressure. O/R
"A potential Biden victory will prevent the rouble from benefiting from overall market sentiment," said Piotr Matys, emerging markets FX strategist at Rabobank. "This risk of the U.S. imposing sanctions on Russia will continue to weigh."
However, Russia's rouble firmed on the Moscow Exchange RUBUTSTN=MCX which was closed for a public holiday on Wednesday. other developing currencies enjoyed healthy gains. Mexico's peso MXN= - a weather vane for U.S. trade relations - strengthened more than 1%. China's yuan CNY= hit a 28-month high as the growing prospects of a Biden presidency raised hopes of a less tense U.S.-China trade relationship. CNY/
"Trump looks more hawkish on China and if he got another four years, his tough anti-China activities will intensify," Hao Zhou, senior economist at Commerzbank (DE: CBKG ) wrote in a note.
"While Biden is also likely to take a hard approach on China, the new administration might need some time to frame the new policy, which might give China some room to breathe."
South Africa's rand ZAR= rose 0.3% against the dollar while Hungary's forint EURHUF= led gains across central European currencies with a 0.7% jump against the euro.
Many emerging market hard-currency bonds joined the rally. Mexico's longer-dated sovereign dollar bonds 91086QAV0= jumped more than 5 cents in the dollar to multi-month highs, with bonds in other developing economies adding to Wednesday's gains.
The Czech crown EURCZK= edged up against the euro ahead of a central bank meeting later in the day, where interest rates are likely to remain unchanged.
Emerging market stocks .MSCIEF raced to their highest level since May 2018, with bourses in China .SSEC , Russia .IMOEX .IRTS and South Africa .JTOPI rising between 1% and 3%. The MSCI's index of emerging market stocks was set for its best day since July.
For GRAPHIC on emerging market FX performance in 2020, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see https://tmsnrt.rs/2OusNdX
For TOP NEWS across emerging markets CENTRAL EUROPE market report, see CEE/
For TURKISH market report, see .IS
For RUSSIAN market report, see RU/RUB
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