* Indian stocks set for over 4-month closing peak on budget proposal
* Soft PMI data weighs on China, Russia
* Russian rouble drops away from over three-month highs
By Aaron Saldanha and Agamoni Ghosh
Feb 1 (Reuters) - Emerging market shares hit a new five month high on Friday, helped by optimism around U.S.-China trade talks, while developing world currencies were on track to post a weekly gain.
U.S. President Donald Trump said on Thursday he will meet Chinese President Xi Jinping soon to try to seal a comprehensive trade deal, as he cited progress during two days of high-level talks. That comes about a day after dovish signals from the U.S. Federal Reserve on future rate hikes gave broad support to emerging markets.
MSCI's emerging market index for stocks was up 0.1 percent on Friday, on track to post its sixth straight weekly gain, while its index of developing world currencies dipped on the day but was set to add 0.8 percent for the week.
"A decisively dovish Fed has provided a fresh source of impetus for a bounce in EM as longer dated US real yields can fall," JPMorgan's Saad Siddiqui wrote in a note to clients.
JPMorgan raised its exposure to emerging market local bonds and currencies after the Fed's shift to a more dovish stance.
"The Fed, dropping any bias towards hiking rates and softening the rhetoric on balance sheet policy is significant for EM assets and paves the way for an extended bounce," wrote Siddiqui.
Benchmark Chinese shares logged their best day in two weeks, as optimism on trade outweighed data from a private survey showing factory activity in China shrank by the most in almost three years in January.
Indian equities were up around half a percent on the proposal of the last union budget before the world's biggest democracy goes to the polls.
Russia's rouble dropped from a three-month high seen on Thursday as the central bank bought more foreign currency, while local stocks eked out a 0.1 percent gain.
Factories in Russia in January shed staff for the first time since August, pressured from weaker growth in output and new orders, data showed.
Commodity giant South Africa's rand was 0.2 percent softer, giving up some of the ground it gained after a Fed-inspired surge to a six month peak, with China's weak economic data dampening risk sentiment.
Turkey's lira dropped half a percent, but was on track to end the week about 1.5 percent higher.
Fund managers on Friday told Reuters JPMorgan has kept dollar-bonds of Venezuelan state-oil firm PDVSA in its emerging market bond indexes in a monthly rebalancing.
Trading volumes of those bonds had dived following U.S. sanctions, prompting speculation that their low liquidity would result in their ejection from the widely followed indexes.
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For RUSSIAN market report, see (Reporting by Aaron Saldanha and Agamoni Ghosh in Bengaluru, Karin Strohecker in London Editing by Keith Weir)