* Stocks retreat from 18-month highs
* Chinese blue-chip, Hong Kong shares slip
* Broader sentiment remains positive
* Trading in currency markets muted
By Sagarika Jaisinghani
Dec 19 (Reuters) - Emerging market stocks retreated from 18-month peaks on Thursday as investors took some cash off the table in the run-up to the Christmas holiday season.
An index tracking developing world stocks fell 0.3%, after gaining for six straight sessions following improved global sentiment in the wake of a U.S.-China trade deal and easing global recession fears.
But with few major updates on the trade dispute expected before the new year, analysts say global stocks have little reason to continue the record-setting rally.
"Strategically, we are positive on emerging markets, but tactically it might be time to take profits right now and wait for new indications on the trade side," said Jakob Christensen, head of EM research at Danske Bank.
Shares in mainland China ended the day flat, while blue-chip equities fell for the second day in a row. Hong Kong stocks slipped about 0.3%.
While global investors largely shrugged off U.S. President Donald Trump's impeachment on Wednesday, they have again turned cautious about the political horizon for 2020 given British Prime Minister Boris Johnson's willingness to take a hard line on Brexit negotiations.
Still, with a broadly optimistic outlook spurring demand for riskier assets and confidence in local economies returning as a result of central bank interventions, emerging market stocks are on course for their best month since January.
Turkey's stock index rose 0.3% for the first time in three sessions, while South African equities stayed near six-week highs. Russian shares were nearly flat after rising for six days in a row.
With trading tapering off ahead of the holiday period, a basket of developing world currencies was nearly unchanged against a slightly weaker dollar.
South Africa's rand eased slightly, after hitting a four-and-half-month peak in the previous session, as Fitch affirmed the country's long-term foreign and local currency debt ratings.
The Turkish lira, which has lagged the broader trade-fuelled rally in the past week due to strained political ties with the United States, hit its weakest level against the dollar since an August "flash crash".
The country's BDDK banking watchdog said on Wednesday it was limiting banks' foreign exchange swaps, forwards, options and other derivative transactions with non-residents to a maximum 10% of banks' legal equity.
Investors are also awaiting minutes of the Turkish central banks' monetary policy committee meeting last week, where it cut its benchmark interest rate by 200 basis points to boost a recovery from recession.
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For RUSSIAN market report, see (Reporting by Sagarika Jaisinghani in Bengaluru; editing by Uttaresh.V)