London: Emerging market stocks were trading lower on Friday and set for a weekly loss as a strong dollar lured investors away and worries about stability in the Middle East depressed investor sentiment.

The MSCI emerging equities index was 0.4 per cent lower while the Asia excluding Japan benchmark eased 0.1 per cent.

Crude oil prices fell as investors reassessed the potential impact of the escalating conflict in Yemen, where Saudi Arabia and allies carried out air strikes on Iranian-backed Houthi rebels earlier in the week.

“Oil has again taken centre stage as the deteriorating stability in the Middle East sent prices rocketing roughly 5 per cent [on Thursday], although some of the gains have been reversed this morning,” SEB analysts said in a note.

Russia’s rouble was 0.6 per cent lower against the dollar while Gulf assets were mixed, with Saudi Arabia’s bourse

trading up 0.4 per cent and Dubai retreating 0.8 per cent.

Emerging market assets have also come under pressure in recent weeks from the prospect of higher interest rates in the United States, which has pushed the dollar higher, luring investment to the promise of higher returns.

Money continues to flow out of emerging market-themed funds, according to weekly figures from EPFR cited by bankers on Friday.

Emerging market local bond funds lost 0.4 per cent of assets under management, while emerging equity funds lost 0.3 per cent in the week to March 25.

“It seems that investors are not convinced that the pause in the appreciation of the US dollar is anything but temporary. Low levels of conviction together with weak Chinese data are not helpful for attracting flows to EM,” said Standard Bank analysts.

Central European currencies weakened against the euro as the region’s central banks tackle the threat of deflation with interest rate cuts.

The Hungarian forint was 0.3 per cent lower as the central bank governor said cutting rates further from the record low reached this week was a possibility.

The threat of instability in the Middle East knocked Turkish assets, pushing the lira down 0.8 per cent against the dollar while stocks fell by more than 1 per cent.