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EMERGING MARKETS-Turkish lira weakens on sanctions threat; EM stocks stabilise

Sept 11 (Reuters) - The Turkish lira slipped on Friday after the EU threatened sanctions, while emerging market stocks steadied after recent losses but rising trade tensions and worries about a shaky global economic rebound still weighed.

The European Union will draw up a list of sanctions to be imposed on Turkey if Ankara refuses to come to the negotiating table to resolve a territorial dispute with Greece and Cyprus, the EU’s Mediterranean states said on Thursday.

The lira was 0.2% weaker, after strengthening on Thursday for the first time in two weeks.

The Turkish currency has lost about 20% of its value this year, and recently hit all-time lows, with worries about depleting foreign exchange reserves and surging inflation also weighing as Turkey’s economy struggles with the impact of the coronavirus pandemic.

Most other currencies in developing markets firmed against a weaker dollar.

South Africa’s rand recovered 1% to 16.74 after sliding on Thursday when data showed a slump in mining and manufacturing output, and the current account swung to a deficit in the second quarter as South Africa’s GDP shrank by a record 51%.

However, “it is unlikely that we see the dollar-rand pair break out of the 16.60-17.00 range for the week today, with nothing in the way of a clear catalyst on the cards,” said economists at ETM Analytics.

Russia’s rouble extended gains to a third day. After ending last week 1.8% lower, the currency is set to post a weekly rise of about 1%.

While the European Union considers sanctions on Russian individuals deemed to have been involved in Kremlin critic Alexander Navalny’s suspected poisoning, the United States said it could restrict funds for malign activities as it works with allies to hold accountable those responsible.

Still, the consensus has long been that as long as sanctions don’t make it illegal to own Russian sovereign debt, new threats won’t dent the appeal of decent 2% ‘real’ interest rates and one of the strongest public balance sheets in the world.

Ahead of a meeting next week, the Russian central bank said it would be cautious while considering another cut in the key interest rates.

Emerging market stocks rose 0.4% after having lost about 3% over the last seven sessions, but were still set for a loss on the week. Elevated jobless claims from the United States overnight, doubts about U.S stimulus and rising strains between Washington and Beijing still threaten more losses.

The EM index is set to log its second straight week of losses, down about 1%.

For GRAPHIC on emerging market FX performance 2020, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance 2020, see tmsnrt.rs/2OusNdX

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For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru; additional reporting by Mfuneko Toyana; Editing by Susan Fenton)

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