EMERGING MARKETS-Russia's rouble weakens as U.S. set to slap sanctions

* Rouble, Russian stocks worst performers in EMEA

* Dollar weakens ahead of retail sales data

* Turkish c.bank expected to hold rates at 1100 GMT meeting

April 15 (Reuters) – Russia’s rouble plummeted on Thursday following reports that Washington was considering new sanctions on the country, while the Turkish lira strengthened ahead of the first interest rate decision under new central bank chief Sahap Kavcioglu.

The rouble weakened more than 2% to the dollar, erasing most of its gains this week after sources told Reuters the United States will announce sanctions on Russia as soon as Thursday for alleged election interference and malicious cyber activity.

The move threatens to further sour ties between Russia and the West, which were already under stress from NATO scrutiny of Russian military actions in eastern Ukraine.

Russian dollar-denominated bonds plunged as sources also said the United States would announce aggressive new measures targeting the country’s sovereign debt. The rouble was the worst performer across Europe, the Middle East, and Africa on Thursday, while Russian stocks also fell.

Other emerging market currencies rose slightly, with the dollar hitting four-week lows on growing expectations of a dovish Federal Reserve. U.S. retail sales data is also expected later in the day.

“The figure should help to cement the “risk-on” mood and therefore perhaps be good for stocks but negative for the dollar,” Marshall Gittler, head of investment research at BDSwiss wrote in a note.

Turkey’s lira strengthened slightly ahead of an interest rate decision at 1100 GMT. Financial markets were rattled last month after President Tayyip Erdogan fired a well-respected governor who had hiked rates, and replaced him with Kavcioglu, making him Turkey’s fourth central bank chief in less than two years.

The move had demolished the country’s financial credibility, given that Kavcioglu shares the president’s unorthodox view that high interest rates cause inflation. Turkish inflation is currently well above the central bank’s targets.

“Given Governor Kavcioglu’s vocal criticism of high interest rates before his appointment, we would question the credibility of today’s statement even if former Central Bank Governor Agbal’s hawkish guidance is maintained,” analysts at Credit Suisse wrote in a note.

“The risk scenario for the meeting – albeit with a low probability – is a policy rate cut of 50-100bps.”

Turkish stocks traded slightly higher, with most other EMEA bourses logging gains.

Central European currencies dipped against the euro, while stocks in the region traded flat.

In Asia, China’s yuan edged lower to the dollar ahead of first-quarter GDP data, which will provide clues on the country’s monetary policy outlook.

For GRAPHIC on emerging market FX performance in 2021, see tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see tmsnrt.rs/2OusNdX

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