* Asian shares lead rally in emerging stocks
* Mexico awaits central bank meet
By Sruthi Shankar
June 27 (Reuters) - Hopes of a de-escalation in the U.S.-China trade dispute at the G20 summit this weekend boosted emerging market stocks on Thursday, with Asian equities leading gains, although currencies were mixed against a steady U.S. dollar.
The Chinese blue-chip stock index closed up over 1%, with similar gains in Hong Kong, which saw fresh rallies in protest over a suspended extradition bill that has plunged the Chinese-ruled city into political crisis.
The MSCI index of developing world stocks rose 0.7%, with modest gains seen across most stock markets. The main equities index has gained in five of the past eight sessions.
"The view being shared by investors is that it (Trump-Xi meet) will be a cordial one with an agreement to talk later. No breakthroughs, but certainly no immediate new tariffs," said Koon Chow, emerging markets strategist at UBP in London.
"But it is very much a waiting game."
Helping risk-on sentiment, the South China Morning Post (SCMP) reported Washington and Beijing were laying out an agreement that would help avert the next round of tariffs on an additional $300 billion of Chinese imports.
Emerging markets sold off sharply in May amid worries of a global slowdown with both China and the United States sides making little efforts to reach a trade deal. Markets have recouped some of the losses amid signs of monetary policy easing from the big central banks to stir growth.
However, the recent toning down of aggressive interest rates from the U.S. Federal Reserve put the dollar on a recovery mode.
In emerging currencies, Turkey's lira was a touch weaker. Turkish government is reviving plans to transfer the central bank's 46 billion lira ($8 billion) in legal reserves to its deteriorating budget to shore it up, sources familiar with the plans told Reuters.
Investors will be watching for signs of U.S. sanctions on Turkey over its purchase of Russian S-400 missile defence systems as presidents Tayyip Erdogan and Donald Trump prepare to talk on the sidelines of the G20 summit.
"Erodogan is keen to convince Trump that the purchase is not egregious to the relationship that Turkey has with the U.S. It will be interesting to see if Trump will agree to that, I'm doubtful. But the most important thing here is to see if Erdogan has a Plan B if there is a pushback from Trump," Chow said.
South Africa's rand rose about 0.4% after a central bank report showed the country saw foreign direct investment inflows in the first quarter versus outflows in the previous quarter. South Africa relies heavily on foreign money to cover its large budget and current account deficits.
Russia's rouble slipped for a third day and the Mexican peso edged lower ahead of its central bank meeting.
Most analysts expect the Bank of Mexico (Banxico) to hold its benchmark interest rate steady at 8.25%, according to a Reuters poll, as annual inflation slowed this month more than expected despite signs of weakness in the economy.
The peso has come under pressure from a credit-rating downgrade as well as trade tensions with the United States. The currency has climbed about 2.7% so far this year.
For TOP NEWS across emerging markets
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see (Reporting by Sruthi Shankar in Bengaluru; Editing by Toby Chopra)