EMERGING MARKETS-Turkey's lira leaps over 2% after c. bank hikes rates as expected

* Turkey’s c. bank raises policy rates to 15%

* Russia’s rouble eases from two-month highs

* S.African rand set for third straight day of declines (Updates with lira’s reaction to central bank policy decision, adds comments)

Nov 19 (Reuters) - Turkey’s lira jumped more than 2% on Thursday after the central bank sharply raised policy rates, while other emerging market currencies weakened as economic repercussions of the pandemic outweighed promising vaccine developments.

The lira climbed to a near two-month high of 7.495 per dollar after the central bank raised its key interest rate to 15% from 10.25%, in line with market expectations, and vowed to sustain monetary tightening until a lasting fall in inflation was achieved.

“This was absolutely the right and logical decision,” said Timothy Ash, senior EM sovereign strategist at Bluebay Asset Management in London.

“The lira lives to fight another day - there is even a chance here of foreign portfolio guys putting money back in and a reversal of dollarisation.”

By 1130 GMT, the lira had pared some gains to trade up 0.9%, while Turkey’s sovereign dollar bonds extended gains to hit fresh eight-month highs and stocks turned positive, led by a 2.3% jump in the banking sector.

The lira has been one of the worst performing EM currencies this year, sinking about 21% against the dollar due to worries about Turkey’s falling forex reserves and the central bank’s ability to tackle elevated inflation levels.

But a major leadership overhaul earlier this month, including a new finance minister and central bank governor, spurred demand for the currency, which soared 11% last week and has since held relatively steady.

Cristian Maggio, head of emerging markets strategy at TD Securities, said the interest rate hike was “important but it has some drawbacks.”

“Simplification of central bank policies has been introduced and tightening has been introduced, but tightening in large scale has not been introduced. Rather than looking at the decision as one and done, the CBRT will have to embark on a long tightening cycle.”

Other currencies and stocks in the region were weaker as surging coronavirus cases in the United States and mounting shutdowns offset positive news from drugmaker Pfizer that its COVID-19 vaccine was 95% effective.

South Africa’s rand, seen as a proxy for emerging- market risk and highly susceptible to swings in global market sentiment, weakened 0.2% before its own central bank meeting later in the day. It is expected to keep rates steady at a record low of 3.5%.

Russia’s rouble eased 0.4% from two-month peaks reached in the previous session after the country’s central bank said it still sees limited room for a rate cut, a month ahead of the next rate-setting meeting.

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For RUSSIAN market report, see (Reporting by Shriya Ramakrishnan and Shreyashi Sanyal in Bengaluru; editing by Larry King, Kirsten Donovan)