Central European markets extended losses yesterday as Britain’s vote to leave the European Union dented global sentiment, with some regional bourses falling as much as 2%.
MSCI’s eastern European benchmark fell 1.3% following a more than 4% tumble on Friday, with bourses in Prague down more than 2% while stocks in Warsaw were down 1.5%.
However, they stayed off the multi-month lows hit on Friday. MSCI’s emerging market index slipped 0.5%.
On currency markets, Poland’s zloty led the pack lower, weakening by 0.8% against the euro while Hungary’s forint slipped 0.6%.
Key gauges of expected volatility in the zloty and the forint against the euro also ticked higher.
“We are working on the negative Brexit scenario now which implies much weaker FX relative to the euro and to the dollar,” Barclay’s strategist Aroop Chatterjee said, predicting the zloty to weaken more than 10% against the euro over the next 12 months.”We think it will be front loaded but also to continue over the medium term,” Chatterjee added.
Others, like Societe Generale EM strategist Phoenix Kalen expected the effects to be more short-lived.”In central Europe we still see potential for weakness but we think it will be temporary especially for the rates markets as the overall backdrop is such that the ‘low for longer’ environment will be extended and there will be support from easier policy.” 
Elsewhere, South Africa’s rand tumbled 0.8% against the dollar while Turkey’s lira fell 0.3%.
Russia’s rouble weakened 0.1%, finding some solace in crude oil prices struggling higher.”Going into this week we expect more weakness as investors digest the negative consequences not just on UK and European growth but also how that feeds into weaker growth in EM economies that trade with them,” said Societe Generale’s Kalen.
Many Asian currencies hit multi-week lows while China’s yuan hit its weakest level in 5-1/2 years, after the central bank allowed the midpoint to weaken by the most since the August 2015 move.
The country’s premier Li Keqiang acknowledged Britain’s vote to leave the EU had increased uncertainty, but added there was no basis for long-term depreciation in the yuan.
Investors also braced for more action from policy makers after thirty central bank governors from around the world pledged to maintain stability in financial markets at an annual meeting in Basel.
Israel’s central bank is expected to keep its key interest rate unchanged for the 16th month at the record low of 0.1% when making its decision later in the day after recent data showed a slight improvement in growth and inflation.
Meanwhile, Saudi Arabia has chosen Citigroup, HSBC and JP Morgan to manage its debut sovereign bond issue, according to sources, in what could be one of the largest ever emerging market debt offerings.
The kingdom is tapping international debt markets to help plug a budget shortfall in the wake of the steep oil price tumble in the last two years.