EMERGING MARKETS-Stocks down after 2-day rally, but set to log weekly gains

* EM stocks set to end four-week losing streak * Russian rouble rallies ahead of cenbank decision at 1030 GMT * Key Russian interest rate expected to be kept unchanged * EM stocks slip as HK tech weighs; Biden-Xi talks eyed By Susan Mathew Worries over Ukraine pushed emerging market stocks and currencies lower on Friday after strong gains over the past two sessions, while the rouble rallied ahead of Russia's central bank policy decision due later in the day.

* EM stocks set to end four-week losing streak * Russian rouble rallies ahead of cenbank decision at 1030 GMT

* Key Russian interest rate expected to be kept unchanged * EM stocks slip as HK tech weighs; Biden-Xi talks eyed

By Susan Mathew Worries over Ukraine pushed emerging market stocks and currencies lower on Friday after strong gains over the past two sessions, while the rouble rallied ahead of Russia's central bank policy decision due later in the day. Japan and Australia imposed sanctions on Russia while peace talks between Kyiv and Moscow stalled. Investors are now focused now on talks between U.S. President Joe Biden and his Chinese counterpart, with Biden set to warn China against supporting Russian aggression.

Russia's rouble surged 6% in offshore trade, while it was flat in Moscow, hovering at 103 per dollar. The country appeared to have pulled back from the brink of default with some funds saying they received their bond coupons that were due on Wednesday. S&P on Thursday cut Russia's sovereign credit rating to "junk" on default risks stemming from harsh Western sanctions, while Germany's Scope became the first agency to withdraw its Russian sovereign credit score following the European Union's ban on rating the country and its companies.

Markets await Russia's central bank decision due at 1030 GMT where the key interest rate is expected to be held at 20% after a sharp emergency rate hike in late February. "The big question is about the central bank governor ... In my view there is some risk that she may step down and that would be quite a blow to Russian inflation outlook, as she has been very instrumental in steering the Russian economy through this crisis," said Jakob Christensen, chief analyst and head of EM research at Danske Bank.

In broader emerging markets, MSCI's index of developing world stocks lost 0.3% with big Hong Kong tech names in the red. The EM index had gained more than 9% over two days, putting it on course to end the week up almost 3%, its highest gain since September. The currencies index lost 0.1% as the dollar regained some strength.

Turkey's lira extended declines after the central bank held the key borrowing rate at 14% on Thursday despite expectations of the war pushing inflation higher. Goldman Sachs now sees Turkey's inflation remaining above 60% for most of this year. Central and eastern European currencies declined against the euro, with Hungary's forint down 0.4%.

Emerging markets' retail hard currency bond funds suffered their 10th week of outflows, according to JPMorgan. The investment bank said the bond funds saw $13 billion of net outflows this year, the worst start to a year since 2014. For GRAPHIC on emerging market FX performance in 2022, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2022, see https://tmsnrt.rs/2OusNdX

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