EMERGING MARKETS-Currencies sapped by firm dollar, Turkish lira hits record low

* Turkey’s lira stumbles for third straight session

* Underwhelming China data subdues risk appetite

* EM stocks, FX indexes still headed for weekly gains

* U.S.-China talks about Phase 1 trade deal awaited

Aug 14 (Reuters) - Emerging market currencies fell on Friday as the dollar firmed on bleak data from China, while Turkey’s lira hit a record low as its outlook worsened after the central bank’s informal measures to stabilise the currency proved to be temporary.

The lira weakened as far as 7.3660, going beyond a previous all-time low of 7.3650 hit a week earlier, and remained one of the worst performing emerging market currencies, losing 19% against the dollar this year.

Investors worried about the risk of rising inflation and even a balance of payments crisis, all amid concerns over depleted reserves, costly state FX interventions and a trend of Turks buying foreign currencies.

The central bank said this week it would halt cheaper funding that had allowed primary dealers to borrow well below its policy rate, which only provided tentative support to the currency.

Other developing world currencies were knocked down by a bounce in the U.S. dollar after data showed China’s retail sales slipped in July, denting expectations for a modest rise on wariness about the coronavirus, while the factory sector’s recovery struggled to pick up pace.

“China was first in to the coronavirus crisis and arguably one of the first to come out of its first phase (of infections), so the fragile nature of its recovery offers an uncomfortable view of the future for other countries,” said Russ Mould, investment director at AJ Bell.

The MSCI’s index for emerging market stocks was still set to rise for a fourth straight week, while its currencies counterpart also tracked weekly gains.

Investors are now waiting for a meeting between U.S. and Chinese officials over the weekend about their Phase 1 trade deal amid deteriorating relations between the world’s two largest economies.

South Africa’s rand slipped against the dollar, along with the Russian rouble, while currencies in central and eastern Europe, including Hungary, Poland, Romania and the Czech Republic, were mostly flat against the euro.

Istanbul stocks slipped 1.3%, declining the most among regional peers.

Some Turkish companies are rethinking growth as the lira’s slide to record lows has hiked costs and delayed investment plans for some who borrowed in foreign currencies.

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For RUSSIAN market report, see (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Subhranshu Sahu)