* EM FX index at seven-month highs, stocks extend gains
* China's August industrial output, retail sales surge
* Yuan at 16-month high
* Turkish lira flat vs dollar; Ankara sees no EU sanctions
* Polish cenbank policy decision awaited
Sept 15 (Reuters) - Emerging market currencies reached
seven-month highs on Tuesday as upbeat economic data from China
pushed the yuan to a 16-month peak, while Turkey's lira remained
near record lows amid tensions in the eastern Mediterranean.
Keeping hopes for a steady economic recovery alive, China's
industrial output accelerated the most in eight months in
August, while retail sales grew for the first time this year.
A dip in the U.S. dollar ahead of the Federal Reserve's
policy announcement on Wednesday also boosted emerging market
currencies, pushing MSCI's index of developing world currencies
0.3% higher. Its stocks counterpart
rose half a percent, extending gains to a third straight
The yuan firmed 0.4%, taking gains this year to
around 2.6%. But analysts warned against being over optimistic
as trade tensions remain an issue between China and the United
"Tremendous uncertainties are ahead, which seems however
unable to rattle the market for the time being. The market is
split for now on whether the yuan could reverse the depreciation
trend that is in place since 2015," said Hao Zhou, an FX analyst
Turkey's lira touched new lows against a stronger euro
, while against the dollar it was about 0.4%
away from record lows. Moody's downgrade of Turkey's credit
rating had weighed on the currency on Monday.
Tensions with Greece over energy resources in the
Mediterranean have also pressured the currency, which is down
about 20% so far this year.
Ankara does not expect to face European Union sanctions over
the dispute, Foreign Minister Mevlut Cavusoglu said on Monday, a
day after a Turkish survey ship pulled out of contested waters.
The South African rand firmed 0.3% with all eyes on
the central bank's decision on Thursday, while Russia's rouble
made muted gains as oil prices fell.
The Polish zloty was flat against a stronger euro
ahead of a central bank meeting later in the day. Commerzbank's
Tatha Ghose expects no change in monetary policy.
"Had manufacturing growth kept collapsing in latest
readings, and had inflation dropped towards deflation, the
central bank might have looked for monetary easing via
additional quantitative easing programmes," he said.
"But, this is not the situation."
In Budapest, stocks slid 1% in what could be their
biggest drop in two weeks after data showed Hungary's
construction sector output plunged by an annual 21% in July,
posting its biggest fall in four years.
Real estate company Budapesti Ingatlan Hasznositasi es
Fejlesztesi Nyrt was the biggest decliner, down 4.2%.
For GRAPHIC on emerging market FX performance 2020, see http://tmsnrt.rs/2egbfVh
For GRAPHIC on MSCI emerging index performance 2020, see https://tmsnrt.rs/2OusNdX
For TOP NEWS across emerging markets
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see
(Reporting by Susan Mathew in Bengaluru. Editing by Jane