EMERGING MARKETS-Turkey's lira tumbles on worries of crisis as dollar firms

* Lira stumbles as investors await decisive action

* EM stocks falter as U.S. stimulus talks stall

* Russian rouble, S.African rand weaken against dollar

Aug 12 (Reuters) - The Turkish lira resumed its sharp fall on Wednesday on investor worries of a full-blown currency crisis and as a firm dollar made it more vulnerable to a squeeze, while emerging market stocks fell on doubts over coronavirus aid in the United States.

The lira weakened 1.7% to 7.32 against the greenback, as investors looked for more substantial moves from the Turkish central bank to stave off a meltdown in the currency amid concerns over depleted reserves and costly state FX interventions.

The central bank’s decision to halt cheaper funding that had allowed primary dealers to borrow well below its policy rate helped support the lira in the previous session but the optimism did not carry through to Wednesday.

Commerzbank FX analyst, Esther Reichelt, said these backdoor channels to stabilize the currency should be regarded as temporary.

“Credible and permanent interest rate hikes are necessary to control inflation and stabilize the Turkish lira. It is therefore probably only a matter of time before USD-TRY trades above 7.40.”

The dollar extended a bounce from last Friday against a basket of currencies as U.S.-China tensions ratcheted higher following President Donald Trump’s ban on U.S. transactions with the Chna-based owners of video-sharing app TikTok and messaging app WeChat.

The MSCI’s index for emerging market stocks fell 0.2%, as a stalemate between the Republican White House and congressional Democrats over coronavirus relief entered a fourth day without talks on Tuesday, with each party blaming the other for intransigence.

Most Asian markets declined, along with a rapid selling of gold. A fall in prices of the yellow metal also hurt miners in South Africa, which pushed the country’s main equity index 0.5% lower.

South Africa’s Sasol extended declines with a 9% fall as it warned on Tuesday it will report an annual loss after a drop in oil and chemical prices and the impact of the coronavirus pandemic hit earnings.

The rand eased against the dollar, as did Russia’s rouble.

Unrest in Belarus also remained in focus, as Sweden’s foreign minister said she had been invited to an extraordinary European Union foreign affairs meeting on Friday to discuss potential sanctions on the country following Sunday’s presidential election there.

Currencies in central and eastern Europe including Hungary , Poland, Romania and the Czech Republic, were mostly lower against the euro. For GRAPHIC on emerging market FX performance in 2020, see For GRAPHIC on MSCI emerging index performance in 2020, see

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For RUSSIAN market report, see (Reporting by Shreyashi Sanyal in Bengaluru; editing by Emeia Sithole-Matarise)