* Turkish lira has weakened 36.7 percent year-to-date
* South African rand, Mexican peso weaken around 1.5 percent
* MSCI emerging stocks slip 1 percent
By Karin Strohecker
LONDON, Aug 10 (Reuters) - The Turkish lira plunged 7 percent on Friday in its biggest one day fall since its 2001 financial crisis, sending tremors through emerging markets and dragging down many peers to multi-week lows.
The losses sent emerging equities 1 percent lower and pushed developing market borrowing costs to their highest in over a month.
The lira hit a fresh record low, plunging initially nearly 12 percent to 6.4915 to the dollar with markets holding little hope for a resolution of the widening rift between Ankara and Washington with the country's policy makers notably silent. The lira, which has weakened nearly 37 percent since the start of the year, later recovered some losses.
The NATO allies, have been at loggerheads over the detention in Turkey of U.S. evangelical pastor Andrew Brunson on terrorism charges, prompting U.S. sanctions on two of Erdogan's ministers and threats of trade restrictions.
The latest woes are adding to concerns over President Tayyip Erdogan's policy of low interest rates in the face of double-digit inflation and him handing the stewardship of the economy to his son-in-law Berat Albayrak.
Turkey's dollar bonds tumbled some 2 cents to trade at fresh record lows while the premium demanded by investors to hold the country's bonds over safe haven U.S. Treasuries hit the widest since 2009. Local sovereign 10-year bonds blew out to a record 19.6 percent.
"The situation in Turkey cannot go on for much longer," said Cristian Maggio, head of emerging markets strategy at TD Securities.
"Turkey is playing a very dangerous game, they keep lagging behind the curve and the pace of the depreciation and the penalty that the market inflicts on Turkey when it sells off is increasing at a more than linear pace, almost exponentially."
While data showed Turkey's current account widened less than expected in June, investors were awaiting Finance Minister Berat Albayrak announcing his plan for the economy later in the day.
Adding to the Turkey tremors were woes about Russia which is facing threats of new U.S. sanctions.
Russia's rouble traded 0.2 percent weaker after hitting the softest level in more than two years in early trading against the dollar. South Africa's rand and Mexico's peso both tumbled around 1.5 percent, while China's yuan weakened 0.5 percent. MSCI's emerging market currency index dipped 0.7 percent to hit its lowest in a year.
Meanwhile emerging market borrowing costs continued to climb, with the average premium of emerging hard currency bonds over safe-haven U.S. Treasuries rising to 350 basis points - their highest since July 6.
Developing stock markets also felt the pinch. MSCI's emerging stock market benchmark fell more than 1 percent with heavyweight Hong Kong and South Korea both down nearly 1 percent.
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Reporting by Karin Strohecker; Editing by Janet Lawrence