* EM stocks, FX eye weekly declines

* Moody's downgrades Egypt deeper into junk territory

* India's central bank holds rates; signals tight policy

* Czech policymakers debate chance of rate cut this year - minutes

Oct 6 (Reuters) - Emerging market currencies and stocks continued to recover on Friday ahead of a keenly-awaited U.S. jobs report that will be crucial in shaping interest rate expectations, though both asset classes were on track for a third straight week of losses.

MSCI's index of emerging markets stocks climbed 0.7%, while currencies added 0.1% by 0856 GMT.

Both indexes got some respite at the end of a bruising week, which saw investors flee riskier assets following a rout in bond markets on expectations that the Federal Reserve would keep monetary policy tighter for longer.

For the week, however, EM stocks have shed 1.6% so far, while currencies are down 0.3%.

While the bond market turmoil has cooled for now, analysts say the U.S. non-farm payrolls report due at 1230 GMT will be crucial in determining how long U.S. monetary policy would remain restrictive, and consequently shape the outlook for emerging markets assets.

"The pause in the bond selloff is granting some room for recovery for most currencies against the dollar," said Francesco Pesole, FX strategist at ING in a note.

"Today’s U.S. payrolls are, however, the big event of the week and a strong read could easily put markets back on a bearish track and reignite aggressive dollar buying."

In central and eastern Europe, the Czech crown was flat against the euro after central bank minutes showed policymakers debated whether it might be possible to start cutting borrowing costs before the end of this year.

Meanwhile, Egypt's sovereign dollar bonds dropped nearly 3 cents after ratings agency Moody's downgraded the north African country's credit rating to 'Caa1' from 'B3,' citing worsening debt affordability.

The Indian rupee was muted against the dollar after the country's central bank kept its key lending rate steady as widely expected, but signalled it would keep rates high and liquidity tight.

"The vulnerability of inflation to supply shocks, as seen in the past two months, and still steady momentum in growth, suggests little reason for a change in approach," Barclays analysts wrote in a note.

Meanwhile, the Russian rouble weakened to an over seven-week low past 101 against the dollar, pressured by lower oil prices and reduced supply of foreign currency from exporters.

For GRAPHIC on emerging market FX performance in 2023, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2023, see https://tmsnrt.rs/2OusNdX

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For CENTRAL EUROPE market report, see

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(Reporting by Johann M Cherian and Amruta Khandekar in Bengaluru; Editing by Varun H K)