* U.S. report shows Russian meddling in 2020 U.S. elections
* Possible sanctions won’t be a shock to Russian rouble -analyst
* Fed, Brazil central bank decision eyed
March 17 (Reuters) - Emerging market stocks and currencies fell on Wednesday as investors focussed on whether the U.S. Federal Reserve will signal policy tightening, while Russia’s rouble was set for its worst session in two weeks on possible U.S. sanctions.
After touching its highest in nearly seven months last session, the rouble fell 0.2% following a U.S. intelligence report that showed Moscow likely directed efforts to try to swing the 2020 U.S. presidential election to Donald Trump. Sources said it could trigger U.S. sanctions on Russia as soon as next week.
“The sanctions won’t probably be that bad, and also as Russia has the financial means to whether the sanctions, it won’t be such a big shock for the rouble,” said Jakob Christensen, chief analyst and head of EM research at Danske Bank.
“We are cautiously optimistic on the rouble, we think rouble is set to strengthen over the coming months relative to other EM currencies,” he said, as a hawkish central bank and oil prices should help more fundamentally.
The latest threat comes after the United States and European Union imposed sanctions, albeit limited, over the alleged poisoning of Kremlin critic Alexei Navalny.
MSCI’s index of EM currencies was down 0.1%, while the stocks counterpart slipped 0.4%, both down for a third day in four.
The dollar held steady ahead of the Fed decision due at 02:00 p.m. ET. Eyes will be on the reaction of U.S. Treasury yields.
Investors will be looking for any comments on whether the Fed expects a stimulus-induced likely spurt in economic growth to cause inflation to rise enough to warrant a change in their policy stance earlier than expected, or if they would take action to control a recent sell-off in Treasuries.
The Chinese yuan inched higher, while most other Asian currencies dipped in to the red.
South Africa’s rand led losses among the most commonly watched EM currencies, down 0.5%, while Turkey’s lira gave up 0.1%, positioning itself around 7.50 ahead of a key central bank meeting on Thursday.
At Brazil’s central bank meeting on Wednesday, a hike in interest rates by 50-75 basis points is expected, which would be Brazil’s first hike in six years.
The real is among the worst performing EM currencies year-to-date, thanks to worries about fiscal spending, political interference and rising inflation.
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For RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru; Editing by Subhranshu Sahu)