* Argentina seeks IMF financing deal
* Turkey President to meet economic team to discuss lira
* Emerging market borrowing costs hover close to 17 month high
By Karin Strohecker
LONDON, May 9 (Reuters) - A stronger dollar, higher oil prices and rising diplomatic tensions over Washington pulling out of the Iran nuclear deal deepened the broad emerging markets currency sell-off on Wednesday with Turkey and Argentina finding themselves in the firing line. Currencies of developing nations had already been under the cosh after the dollar started a relentless ascent in mid-April and U.S. Treasury yields climbed above the psychological 3 percent threshold.
Adding to woes was U.S. President Donald Trump's decision late on Tuesday to pull out of an international nuclear deal with Iran, hampering risk appetite and sparking worries about fresh tension in the Middle East and global oil supplies.
"U.S. withdrawal from the agreement heightens uncertainty globally, and of course especially in the region," said Tilmann Kolb, emerging markets analyst at UBS Global Wealth Management, adding higher oil prices would ramp up inflationary pressures and in turn impact the trajectory for U.S. interest rates.
"More important though remains the broad based U.S. dollar strength (and) U.S. Treasury yields ... emerging market currencies are vulnerable to this given their high sensitivity to global dynamics."
Emerging market currency indexes plumbed new 2018 lows as the sell-off widened, but it was Argentina and Turkey which took centre stage.
Unable to stem brutal losses which saw the peso hit record lows despite the central bank jacking up interest rates to 40 percent, Buenos Aires pulled the emergency stop by announcing it would seek a financing deal with the International Monetary Fund. The move helped stabilise the currency which is still down 17 percent since the start of the year.
Turkey looked next in line for trouble with the lira tumbling around 1 percent and hitting a fresh record low in early trading following seven days of hefty losses, prompting the central bank on Wednesday to provide additional liquidity measures to shore up the currency.
However, the lira took a sharp turn and strengthened more than 1 percent after government officials said President Tayyip Erdogan will meet members of his economic team later in the day to discuss the lira currency and developments in the economy.
"It remains to be seen whether the meeting results in concrete measures to support the lira, but it does support our argument that allowing the currency to fall precipitously - when Turks cast their votes in crucial presidential and general elections on June 24 - may yield an unpredictable outcome," Rabobank's Piotr Matys wrote in a note to clients.
Meanwhile South Africa's rand and Russia's rouble weakened 0.5 percent in a third day of losses, India's rupee hit a 15-month low while Indonesia's rupiah slipped to a 2-1/2 year low.
The sell-off also kept emerging debt markets under pressure, with the average yield spread on the EMBIG Diversified index - the premium over U.S. Treasuries that investors demand to hold emerging debt – hovering close to the 17-month high hit on Tuesday.
While hard-currency debt looked fragile across most regions, Lebanon's issues suffered some of the biggest declines, with some issues dropping nearly 2 cents. Lebanese markets had already been under pressure after Sunday's election result underscored Tehran's growing regional clout, with investors now fretting over what Trump's decision on the nuclear deal could mean for the country's fragile political situation.
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Reporting and graphic by Karin Strohecker; Editing by Toby Chopra