EMERGING MARKETS-Turkey's lira leads EMEA FX gains, most currencies set for weekly rise

* Turkish c.bank move seen as step in right direction- analyst

* MSCI's currencies index set for fourth straight weekly rise

* EM stocks lifted by upbeat Chinese data

By Shreyashi Sanyal

Nov 27 (Reuters) - The Turkish lira led gains across Europe, the Middle East and Africa on Friday after the country's central bank took more steps to simplify credit channels, while most emerging market currencies were set for weekly gains against a fading dollar.

The lira strengthened 1.1% by 0830 GMT after Turkey's central bank said it had scrapped a rule that nudged banks to ramp up cheap lending, following last week's large interest rate hike.

"The central bank took yet another important step towards simplifying orthodox policies and the adjustment is seen as a step in the right direction by investors," said Piotr Matys, emerging markets FX strategist at Rabobank.

The lira was also boosted by optimism around President Tayyip Erdogan's recent pledge for a new market-friendly era for the economy and as the central bank hiked interest rates by 475 points last week.

However, the surge in the lira following the rate hike prompted investors to take some profits off the table, as it headed for its first weekly fall in three weeks.

The Russian rouble weakened with falling oil prices and against the backdrop of surging coronavirus cases worldwide, while South Africa's rand was flat.

A gauge for emerging market currencies dipped 0.1%, but was set for its fourth straight weekly gain as riskier assets benefited from higher demand spurred by positive news on COVID-19 vaccines.

The MSCI's index for emerging market stocks rose 0.1%, with Chinese stocks leading the advance after data showed October profits at Chinese industrial firms rose, pointing to a steady recovery in the manufacturing sector after it was hit by the COVID-19 pandemic.

Currencies in central and eastern Europe, including Hungary , Poland, Romania and the Czech Republic, were mostly flat to lower against the euro.

Investors have been closely following discussion between leaders of Hungary and Poland after the two countries blocked the European Union's 1.8 trillion euro pandemic recovery plan because the money is conditional on respecting the rule of law.

Lebanon's caretaker finance minister said on Thursday that central bank foreign currency reserves currently stand at $17.9 billion and that there are discussions about reducing subsidy spending as critically low reserves dwindle. Lebanese dollar bonds were flat.

For GRAPHIC on emerging market FX performance in 2020, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2020, see https://tmsnrt.rs/2OusNdX

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For RUSSIAN market report, see (Reporting by Shreyashi Sanyal in Bengaluru; Editing by Subhranshu Sahu)