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EMERGING MARKETS-Turkey's currency hit all-time low; EM stocks at 1-month high

* TRY at 8.56 per dollar

* Eyes on U.S. inflation data t 1230 GMT

* MSCI EM stocks index up 0.3%

* Mainland CHina, Turkey stocks fall

May 28 (Reuters) - Emerging market currencies touched new highs on Friday but a rising dollar ahead of U.S. inflation data tempered gains, with Turkey’s lira hitting all-time lows.

The greenback moved further away from recent lows with all eyes on U.S. inflation data due at 1230 GMT, as a high reading could fuel expectations of policy tightening by the Federal Reserve.

Emerging market currencies had enjoyed a rally as easy monetary policy expectations sent investors seeking high yielders.

The lira fell 0.6% to 8.564 per dollar. Investors will be watching for an S&P ratings review due after the market close.

Turkey’s currency is headed for its fourth straight month in the red as losses intensified this week when a fourth central banker was replaced by President Tayyip Erdogan in two months, heightening questions about the monetary authority’s autonomy.

“Each burst of depreciation risks triggering a fresh lira crisis as it begins to feed back into higher inflation, which the central bank cannot fight off because it is unable to ‘credibly’ hike rates (due to Erdogan’s opposition),” said Tatha Ghose, an FX strategist at Commerzbank.

“Because of its inability to hike rates properly, (the central bank) relies on inflation to cool off via external or other factors so that it can enjoy even a short period of stability.”

South Africa’s rand faltered after a six-day winning streak, slipping by 0.6%, while China’s yuan extended gains and looked set for its best weekly performance since November.

However, the pace of the rally slowed after regulators signalled concern over strong one-way bets on the yuan while Friday’s official guidance rate was the strongest since May 2018, set above the psychologically important 6.4 per dollar level.

Meanwhile, the New York Times reported on Thursday that President Joe Biden will seek $6 trillion in federal spending for the 2022 fiscal year, a day before the White House is expected to unveil its budget proposal.

This saw MSCI’s index of EM stocks join a global rally, up 0.3% at a one-month high, although a dip in Turkish and mainland China stocks kept gains in check.

There was more tit-for-tat between Belarus and the West. Belarusian national carrier Belavia cancelled flights to eight countries on Thursday as more European Union states applied air space restrictions in response to the forced landing of a passenger jet in Minsk.

Meanwhile Belarus' main ally Russia denied access to a second European carrier seeking to skirt Belarus en route to Moscow. Russia's rouble was unchanged against the dollar. For GRAPHIC on emerging market FX performance in 2021, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see tmsnrt.rs/2OusNdX

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For CENTRAL EUROPE market report, see

For TURKISH market report, see

For RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru Editing by Mark Heinrich)

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