  We have observed the X-ray transient XTE J0421+56 in quiescence with
XMM-Newton. The observed spectrum is highly unusual being dominated by an
emission feature at ~6.5 keV. The spectrum can be fit using a partially covered
power-law and Gaussian line model, in which the emission is almost completely
covered (covering fraction of 0.98_{-0.06}^{+0.02}) by neutral material and is
strongly absorbed with an N_H of (5_{-2}^{+3}) x 10^{23} atom cm^{-2}. This
absorption is local and not interstellar. The Gaussian has a centroid energy of
6.4 +/- 0.1 keV, a width < 0.28 keV and an equivalent width of 940
^{+650}_{-460} eV. It can be interpreted as fluorescent emission line from
iron. Using this model and assuming XTE J0421+56 is at a distance of 5 kpc, its
0.5-10 keV luminosity is 3.5 x 10^{33} erg s^{-1}. The Optical Monitor onboard
XMM-Newton indicates a V magnitude of 11.86 +/- 0.03. The spectra of X-ray
transients in quiescence are normally modeled using advection dominated
accretion flows, power-laws, or by the thermal emission from a neutron star
surface. The strongly locally absorbed X-ray emission from XTE J0421+56 is
therefore highly unusual and could result from the compact object being
embedded within a dense circumstellar wind emitted from the supergiant B[e]
companion star. The uncovered and unabsorbed component observed below 5 keV
could be due either to X-ray emission from the supergiant B[e] star itself, or
to the scattering of high-energy X-ray photons in a wind or ionized corona,
such as observed in some low-mass X-ray binary systems.
