EMERGING MARKETS-Hungary shares cheer upgrade, politics weighs on Turkish lira

* Hungary shares climb 0.8 pct after Fitch upgrade to IG

* Lira dips after new PM confirmed, rate cuts eyed

* Greek markets rally on hopes of smooth aid deal

LONDON, May 23 (Reuters) - Hungarian stocks shone on Monday

as the country's return to investment grade after three years in

'junk' territory helped to lift emerging markets after four

straight weeks of losses.

A dip in the dollar allowed a general drift higher

for EM currencies and Greek markets cheered hopes

of a new aid deal, though there was also plenty of uncertainty

elsewhere to keep optimism in check.

The instalment of a new Turkish prime minister, Binali

Yildirim, who has close ties to President Tayyip Erdogan,

weighed on the lira. Economists also suspected that

details on Brazil's budget due on Tuesday might temper the surge

in markets there.

Hungary's shares were up 0.8 percent and the best

performers in eastern Europe after Fitch made it the first

emerging market since Romania with S&P two years ago to graduate

to the so-called 'investment grade' level.

Fitch cited Hungary's declining debt levels and lower

vulnerabilities for the move and Economy Minister Mihaly Varga

said the country could see its borrowing bill drop by around 60

billion forints ($214 million) if another agency followed

suit.

The forint was looking groggy, though, roughly 0.5 percent

lower against both the euro and the dollar.

UniCredit EM FX Strategist Kiran Kowshik said one potential

reason was that it may pave the way for more rate cuts.

"We are quite surprised you have only seen a limited lift in

the forint," Kowshik said.

"It (Other OTC: ITGL - news) is also possible that with the event risks on the

horizon, such as the Brexit vote for example, it might not be

the right time to be playing these bonds," Kowshik added,

referring to Britain's June 23 referendum on whether to leave

the European Union.

Turkey's lira sagged to 2.9871 to the dollar, partly on

political worries.

Veteran transport minister Yildirim, chosen at a special

congress on Sunday as leader of the ruling AK Party, made clear

his priority as prime minister would be a new constitution

centered on a strong executive presidency, as sought by Erdogan.

"Erdogan is a man of purpose, a man of the people, a

tireless defender of the great Turkey," he said. "We have said

with pride, heads held high, we are comrades of Erdogan ... Your

passion is our passion, your cause our cause, your path our

path."

The prospect of another rate cut when the central bank meets

this week also pressured the lira. "We are expecting a 50 basis

point rate cut in the interbank rate," said Barclays (LSE: BARC.L - news) emerging

market economist Aropp Chatterjee.

"We think that the change in the government, alongside the

change in the central bank, which is trying to bring down

lending rates, will lead the lira toward 320-325 towards

year-end."

Elsewhere, Russian sources said the country was selling a

10-year eurobond through VTB Capital after European banks were

put off by sanctions, while Kenya and Israel were expected to

keep their respective interest rates on hold.

Asian currencies rose overnight on the back of the softer

dollar as traders waited to see whether U.S (Other OTC: UBGXF - news) . data and comments

from Federal Reserve officials this week would feed last week's

resurgence in June or July rate hike bets.

Emerging Markets Prices from Reuters

Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley (Xetra: 885836 - news)

Emrg Mkt Indx 789.67 +4.41 +0.56 -0.56

Czech Rep 873.67 -1.52 -0.17 -8.64

Poland 1798.77 -7.61 -0.42 -3.25

Hungary 26619.99 +185.51 +0.70 +11.28

Romania 6391.58 +24.46 +0.38 -8.75

Greece 645.83 +6.35 +0.99 +2.29

Russia 878.19 -14.90 -1.67 +16.00

South Africa 46373.06 -158.39 -0.34 +1.26

Turkey 76445.96 +88.22 +0.12 +6.58

China 2844.02 +18.53 +0.66 -19.64

India 25256.75 -45.15 -0.18 -3.30

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2016

Czech Rep 27.02 27.02 -0.00 -0.07

Poland 4.44 4.41 -0.70 -4.14

Hungary 316.54 314.57 -0.62 -0.60

Romania 4.52 4.51 -0.22 -0.00

Serbia 122.59 122.53 -0.05 -0.91

Russia 66.99 66.73 -0.38 +8.90

Kazakhstan 336.85 335.10 -0.52 +1.08

Ukraine 25.06 25.00 -0.24 -4.42

South Africa 15.66 15.62 -0.28 -1.27

Kenya 100.75 100.80 +0.05 +1.44

Israel 3.87 3.88 +0.04 +0.36

Turkey 2.99 2.98 -0.56 -2.51

China 6.55 6.55 -0.07 -0.93

India 67.40 67.40 -0.00 -1.78

Brazil 3.51 3.52 +0.15 +12.67

Mexico 18.41 18.33 -0.43 -6.75

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 420 0 .02 7 15.69 1

All data taken from Reuters at #N/A The record could not be

found GMT.

Currency percent change calculated from the daily U.S. close at

2130 GMT.

For GRAPHIC on emerging market FX performance 2016, see http://link.reuters.com/jus35t

For GRAPHIC on MSCI (NYSE: MSCI - news) emerging index performance 2016, see http://link.reuters.com/weh36s

For GRAPHIC on MSCI emerging Europe performance 2016, see http://link.reuters.com/jun28s

For GRAPHIC on MSCI frontier index performance 2016, see http://link.reuters.com/zyh97s

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see )

(Reporting by Marc Jones; Editing by Gareth Jones)