Oct 1 (Reuters) - Emerging markets began the final quarter of 2018 in a mixed mood on Monday as signs of weakness in manufacturing activity in China and elsewhere limited the optimism from a revamped North American deal that sent the Mexican peso to a near two-month high.
Asian currencies including the Indian rupee, the Taiwanese dollar and South Korea's won all weakened against the dollar after growth in the Chinese manufacturing sector stalled in September, suggesting a trade war with the United States was taking a toll.
Turkey's lira, one of the biggest victims of the outflows of cash from the developing world in the past six months, rode out its own batch of poor data to firm around 1 percent.
Markets have taken heart from signs that a political standoff between Washington and Ankara could be resolved soon and from assurances by President Tayyip Erdogan he would not interfere with policy at a central bank which delivered a bumper 6.25 percentage point hike in interest rates last month.
"There does seem to be moves by the Turkish government to improve relations with the U.S.," said William Jackson, chief EM economist at Capital Economics.
"We are not seeing the belligerence we saw in August which helped to cause a sharp fall in the lira."
Helped by the moves in the peso and the lira, the MSCI index for EM currencies was flat.
China's financial markets were closed for a holiday, as was Hong Kong's stock exchange but the offshore version of its yuan weakened by 0.2 percent after the PMI numbers. The rupee shed 0.4 percent and the Taiwanese dollar 0.2 percent.
High-yielding bets in emerging markets have taken a hammering in recent months, with Turkey, Argentina and India among those hit hardest, as interest rates in the developed world began to rise, drawing money home.
President Donald Trump's battery of trade conflicts has also fed concerns over the pace of growth, crucial to retain investor confidence in developing markets.
The Mexican peso strengthened by over 1 percent after the United States and Canada on Sunday forged a last-gasp deal to salvage NAFTA as a trilateral pact with Mexico.
Although Washington had already struck a bilateral trade deal with Mexico, while threatening to leave out Canada, the latest move came as a relief to financial markets as the deal was largely intact and had not fractured supply chains between weaker bilateral agreements.
"With the addition of Canada, it has removed lots of uncertainty that there could be U.S. congressional hurdles in preventing Mexico signing a deal with the United States," Jackson said.
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For RUSSIAN market report, see (Reporting by Sruthi Shankar and Aaron Saldanha in Bengaluru, editing by Ed Osmond)