By Sujata Rao
LONDON, Aug 22 (Reuters) - Emerging stocks slipped half a percent on Monday after the U.S. Fed's number two policymaker rekindled expectations of a near-term rate rise, while Turkish assets weakened after Fitch cut its credit rating outlook.
MSCI's emerging equity index fell 0.6 percent to the lowest in more than 10 days after rallying for six straight weeks. Markets overall are jittery about this week's gathering of central bankers in Jackson Hole, Wyoming. A speech there on Friday by Federal Reserve Chair Janet Yellen could yield signals about U.S. rate hike timings.
The dollar was buoyed by the comments from the Fed's Stanley Fischer, who said the bank was close to hitting its employment and inflation targets.
"The tone has been set by the Fed over the weekend.... If (Fed policymakers) are hawkish we may see further weakness in emerging markets, especially as EM has strengthened so much over the summer," Jakob Christensen, head of EM research at Danske Bank, said, predicting some weakness for emerging currencies.
Many Asian currencies touched multi-week lows to the dollar, including the Indian rupee which slipped to a one-month low after the naming of the hawkish Urjit Patel as the new central bank governor fuelled a selloff in local bonds.
Indian 10-year rupee bond yields hit two-week highs of 7.19 percent at one point as Patel is seen holding interest rates steady at the bank's next meeting. Shares in Indian state-run banks also fell as he is expected to continue an aggressive clean-up of banks' bad loan books.
In emerging Europe, the Turkish lira lost 0.5 percent to the dollar, local stocks slipped 0.4 percent and 10-year yields rose further after surging 10 basis points on Friday, when Fitch cut the outlook on the country's sovereign rating to negative from stable. It retained its investment grade score however.
Its most-traded dollar bonds fell as much as 0.9 cents, according to Tradeweb, to the lowest in two weeks .
Tuesday's central bank meeting will be crucial for investors to gauge how policymakers deal with politicians' calls for interest rate cuts in the face of rising inflation and political instability. The bank cut overnight lending rates last month despite a failed putsch just days before.
The central bank's latest survey forecast Turkey's end-2016 inflation at 8.21 percent versus a previous 7.81 percent prediction.
"This is not a time to lower policy rates. That will be hugely important guidance for markets - if they are lowering we could see a significant sell-off," Christensen said.