By Walter Brandimarte and Sujata Rao
RIO DE JANEIRO/LONDON, Feb 27 (Reuters) - Geopolitical tensions drove Russia's rouble to five-year lows against the dollar while pushing Ukraine's hryvnia 9 percent lower, but Brazilian markets were supported by data showing the economy grew far more than expected at the end of 2013.
Russia's defiant response to the political turmoil in neighboring Ukraine spooked investors in Europe and Asia, with Moscow quoted as saying fighter jets along Russia's western borders had been put on combat alert.
Moscow has also said it would defend the rights of its compatriots in a "strong and uncompromising" manner, while Kiev warned the Kremlin against any troop moves in Crimea, which has a big ethnic Russian population.
"People are drawing parallels with the 2008 Russia-Georgia war," said Manik Narain, a strategist at UBS in London.
"There are definitely fears about geopolitics, (at a time when) the general mood towards emerging markets is not great. The concern is this could develop into a proper civil war in Ukraine that splits the country."
While the ripples from Ukraine spread as far as Asia, the biggest impact was felt closer to home.
The hryvnia hit a new low against the dollar, trading beyond 11 per dollar a day after the central bank said it was no longer supporting the currency. Its year-to-date losses amount to around 25 percent.
The country's credit default swaps rose 24 basis points, according to Markit.
The crisis is taking a heavy toll on Russia, whose banks are estimated to have a $28 billion exposure to Ukraine as well as major trade ties, including gas exports.
The rouble fell as low as 36.11 per dollar and hit a record low against a dollar-euro basket, staying just off a record low to the euro.
Russian stocks fell 1.4 percent in their biggest one-day loss since early-January, led by VTB Bank whose shares plunged more than 3 percent. State-controlled Sberbank and gas monopoly Gazprom lost more than 1 percent on the day.
"The rouble will be the main victim here on the back of the situation in Ukraine. There's a lot of economic ties and political involvement as well," said Abbas Ameli-Renani, a strategist at RBS.
While many political risk analysts reckon an outright military conflict is unlikely, Ameli-Renani predicted "a period of over-reaction" on financial markets.
"Increasingly, given the border shared with Hungary and Poland, central Eastern countries are coming into focus, as seen in the reaction of the zloty yesterday," he said.
The Polish zloty, central Europe's most liquid currency, fell as much as 0.3 percent against the euro to two-week lows after losing 0.6 percent in the previous session.
Turkey's lira fell for the fourth straight session, trading down 0.7 percent to 2.24 per dollar and also hit by domestic problems, with audio recordings appearing to implicate Prime Minister Tayyip Erdogan in corrupt dealings having emerged this week. He denies the accusations and said the tapes are fake but the affair is causing jitters before local elections in March.
Brazilian markets resisted the wider emerging market turbulence after data showed the economy grew 0.7 percent in the fourth quarter, above the 0.3 percent forecast by economists. Full-year growth reached 2.3 percent, compared with 1.0 percent in 2012 and 2.7 percent in 2011.
The numbers dispelled fears of a technical recession at the end of the year and suggested the central bank has still some more room to tighten monetary policy after reducing the pace of interest-rate hikes to 0.25 percent on Wednesday night.
"Coming out on the heels of the Brazilian central bank's decision yesterday to slow the pace of interest rate hikes, this report suggests room for tightening still exists as 2014 proceeds," Bill Adams, senior economist with PNC, said in a statement.
"Inflation still seems to outweigh slower growth as the biggest risk to the outlook," he added.
Brazil's benchmark Bovespa index rose about 1 percent while the real gained 0.15 percent to 2.3476 per dollar.
MSCI's broader emerging equity index rose 0.4 percent thanks to a rebound in Chinese shares. While the Chinese yuan extended its recent slide initially, it later recouped the losses, helping to calm Asian markets.