EMERGING MARKETS-Stocks struggle on China COVID worries; Hungary's forint slips

* China stocks tumble on heightened COVID worries

* Hungary inflation rises in August

* Peru interest rate decision due Thursday

Sept 8 (Reuters) - An index of emerging market stocks struggled for gains on Thursday following a recent selloff as lingering COVID-19 woes dragged Chinese shares lower, while Hungary’s forint led declines among peers after its central bank left the one-week deposit rate unchanged.

MSCI’s emerging market (EM) stocks index was flat by 0854 GMT, paring gains of 0.2% from earlier in the day.

China shares defied a rally in other Asian markets to slip 0.3% and 0.4%, respectively, after Sichuan’s capital city Chengdu extended a lockdown in most of its districts, adding gloom to an already cloudy economic outlook.

Hungary’s forint fell 0.6% against the euro to lead losses among Central and Eastern European currencies.

Headline inflation in the country rose to an annual 15.6% in August, with further rises expected from next month, after surging energy costs forced Budapest to curb its years-long policy of keeping a lid on household utility bills.

“The data is a bit weaker - inflation was slightly softer and perhaps decreases the need for larger hikes. But in the backdrop, there’s a sense that perhaps later this month, there will be progress on improved relations with the EU which could facilitate EU funding to Hungary,” said Chris Turner, global head of EMEA and LATAM research at ING.

The central bank on Thursday left its one-week deposit rate unchanged at 11.75%, the highest in central Europe, helped by recent gains in the forint.

Meanwhile, South Africa’s rand slipped 0.3% ahead of the release of current account and local industrial data. Business confidence in the country slipped in the third quarter, a new survey showed.

Broader currencies were little changed as the dollar resumed a rally, and investors treaded cautiously ahead of U.S. Federal Reserve Chair Jerome Powell’s speech later in the day and an interest rate decision from the European Central Bank.

Malaysia’s ringgit steadied against the dollar. The central bank hiked interest rates for a third consecutive time, raising by 25 basis points, while Peru’s central bank decision is also due later in the day.

“These are all defensive rate hikes from being on the receiving end of currency weakness to the stronger dollar, and are not likely to deliver turnaround in currencies... We’d have to wait for (Fed policy) to turn, which won’t be until Q1 next year,” Turner added.

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Reporting by Anisha Sircar and Amruta Khandekar in Bengaluru; Editing by Krishna Chandra Eluri