LONDON, June 6 (Reuters) - Mexico's peso steadied on Wednesday a day after NAFTA worries sent it skidding, though stress was back on the rise in Turkey as traders geared up for a key test for its central bank.
A weaker dollar meant a general rise in EM currencies and a fourth gain in five for stocks though there were plenty of cross-currents to contend with.
Mexico's peso found a footing after a near 2 percent drop on Tuesday, when suggestions from the United States that it wanted to deal with Mexico and Canada separately had thrown another twist into NAFTA negotiations.
Turkey's lira and bonds slid back towards their recent lows as markets waited to see if the central bank would reinforce last month's emergency 300 basis point interest rate hike when it meets on Thursday.
Deputy Prime Minister Mehmet Simsek said in a television interview that the bank has done what was necessary and would continue to do so, but investors will need to see the proof.
"Markets will be closely watching what comes out of the CBRT meeting and whether they come out with a subsequent hike," said JP Morgan Asset Management EM debt portfolio manager Diana Amoa.
"We want to see a follow through from the last hike and we actually need to have more credible rhetoric," she added, saying for many it was a crucial test of the bank's character and credibility.
Money market rates currently point to a 50 basis point rise at some point within the next three months.
In Asia, the Reserve Bank of India took some of its watchers by surprise as it raised its main interest rate rate for the first time in more than four years to 6.25 percent following a recent rise in inflation.
The 10-year benchmark bond yield rose 4 basis points to 7.87 percent after the announcement, while the rupee was up at 66.97 to the dollar from 67.05 before the news.
"We do expect one more rate hike by the Monetary Policy Committee over the next few months, most likely in August," said Tanvee Gupta Jain, Chief India Economist, UBS Securities India.
Malaysia's ringit underperformed though as its central bank chief resigned. It was the latest in a string of departures as the country's 92-year-old new leader purges top officials seen as close to the previous government.
Russia's rouble went in the other direction, rallying 0.3 percent as oil rose, a meeting with Ukraine, Germany and France was confirmed and its central bank said its rate cuts were almost over.
It has been bringing rates down since 2015, when inflation was in double digits, and is now homing in on a level more suitable for current economic conditions - as well as for its inflation target of 4.0 percent.
"We should switch to neutral monetary policy in the short run," Governor Elvira Nabiullina told Reuters in an interview.
Poland's central bank was also meeting later where it is widely expected to keep its interest rates on hold.
Warsaw shares were up for a fourth day but the zloty led a retreat of central European currencies against the euro which rose after the ECB's chief economist said the bank would dicuss when to end its 2.6 trillion euro stimulus programme next week.
Ukraine's dollar-denominated bonds fell after Prime Minister Volodymyr Groysman said he would propose dismissing his Finance Minister Oleksandr Danylyuk.
The decision needs parliament's approval in Kiev but the row stokes fresh concerns about the country's teetering IMF programme.
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Reporting by Marc Jones; graphic by Karin Strohecker