EMERGING MARKETS-Turkish lira hit by inflation jump, lags steadier emerging markets

By Sujata Rao

LONDON, Sept 5 (Reuters) - Turkey's lira fell on Tuesday as data showed inflation back in double figures, underperforming broader emerging markets that benefited from dollar weakness and absence of more rhetoric from North Korea.

MSCI (Frankfurt: 3HM.F - news) 's emerging equity index was flat after posting its biggest one-day fall in three weeks on Monday in reaction to Pyongyang's weekend test of a hydrogen bomb.

With (Other OTC: WWTH - news) the dollar on the backfoot, most emerging currencies firmed, including the South Korean won which had seen its biggest daily fall on Monday since January.

While Seoul shares closed at two-week lows, the country's economy remains strong - data on Tuesday showed its current account surplus at a five-month high in July.

Most stock markets in emerging Europe, the Middle East and Africa also rose, including Istanbul which firmed 0.3 percent . The lira however slipped 0.4 percent, rising off 10-month highs touched last week while 10-year yields rose to a one-week high.

Turkish consumer inflation jumped to 0.52 percent in August, exceeding the 0.15 percent forecast rise and amounting to 10.68 percent year-on-year.

Analysts said the data indicated rate cuts were off the table in Turkey and the central bank would be forced to keep the average funding rate close to the current 12 percent. That is however seen supporting the lira.

"The data will sow doubts about the bank's ability to keep inflation in check, it has missed its target for many years now and that's why we're seeing the lira weaker than other currencies today," said Jakob Christensen, chief emerging markets analyst at Danske Bank (LSE: 0NVC.L - news) .

He noted markets overall were calmer than on Monday in the absence of fresh rhetoric or action from North Korea.

"Concerns over North Korea will linger, but it will be more up and down than a general deterioration," Christensen added.

The South African traded just off two-month highs, supported by gold prices near one-year high and expectations that second quarter data at 0930 GMT will show the economy bounced back from two consecutive quarters of contraction.

In central Europe, Polish stocks added 1 percent to new two-year highs though the currency was flat ahead of Wednesday's interest rate decision.

The Czech crown slipped 0.2 percent after recent gains fuelled by expectations of a rate rise this month.

ING Bank, which last year dubbed short euro/crown 'the trade of the year', said it was closing that position and noted the crown had struggled to break below 26 per euro despite central bank hawkishness.

"With the market already pricing in one full 25 basis point rate hike by the end of this year and around 60 bps by the end of 2018, the central bank would have to signal and deliver a much more hawkish tightening cycle to push euro/crown meaningfully lower," ING added.

Earlier, China's yuan continued its winning streak, approaching 16-month highs of 6.515 per dollar - having gained 2 percent in less than two weeks.

Mainland Chinese shares hit the highest since January 2016 thanks to solid economic and earnings growth and expectations that Beijing will run a steady ship before an October Communist Party Congress.

"Recent yuan appreciation indicates the market has started to unwind yuan short positions," Commerzbank (Xetra: CBK100 - news) analysts said.

"As a result, the market has gradually shifted the view on yuan: The overwhelming one, at this moment, is that the yuan will remain strong before and during the 19th National Congress of the Communist Party of China."

For GRAPHIC on emerging market FX performance 2017, see http://tmsnrt.rs/2e7eoml For GRAPHIC on MSCI emerging index performance 2017, see http://tmsnrt.rs/2dZbdP5

For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see) Emerging Markets Prices from Reuters Equities Latest Net Chg % Chg % Chg

on year

Morgan Stanley (Xetra: 885836 - news) Emrg Mkt Indx 1084.82 +1.48 +0.14 +25.81

Czech Rep 1024.17 -1.99 -0.19 +11.13

Poland 2544.19 +24.77 +0.98 +30.61

Hungary 37571.10 +105.84 +0.28 +17.40

Romania 8059.77 +31.23 +0.39 +13.76

Greece 810.80 +1.92 +0.24 +25.97

Russia 1094.33 +2.50 +0.23 -5.03

South Africa 49717.67 -79.04 -0.16 +13.25

Turkey 09240.06 -770.42 -0.70 +39.80

China 3385.13 +5.55 +0.16 +9.07

India 31775.00 +72.75 +0.23 +19.34

Currencies Latest Prev Local Local

close currency currency

% change % change

in 2017

Czech Rep 26.09 26.06 -0.12 +3.51

Poland 4.24 4.24 +0.06 +3.96

Hungary 306.23 305.80 -0.14 +0.85

Romania 4.60 4.60 +0.03 -1.32

Serbia 119.57 119.45 -0.10 +3.16

Russia 57.79 57.79 +0.01 +6.02

Kazakhstan 340.80 338.87 -0.57 -2.10

Ukraine 25.97 25.87 -0.39 +3.97

South Africa 12.95 12.97 +0.15 +6.03

Kenya 103.15 103.10 -0.05 -0.76

Israel 3.58 3.57 -0.10 +7.70

Turkey 3.44 3.43 -0.24 +2.46

China 6.55 6.53 -0.33 +6.02

India 64.12 64.04 -0.13 +5.96

Brazil 3.14 3.14 +0.01 +3.58

Mexico 17.82 17.87 +0.26 +16.23

Debt Index Strip Spd Chg %Rtn Index

Sov'gn Debt EMBIG 316 1 .00 8 04.01 1

All data taken from Reuters at 08:47 GMT. Currency percent change calculated from the daily U.S. close at 2130 GMT.

(Reporting by Sujata Rao and Alex Winning, Graphic by Karin Strohecker; Editing by Keith Weir)