LONDON, Sept 13 (Reuters) - The Russian rouble firmed marginally on Friday towards seven-week highs as the central bank surprised by keeping interest rates on hold but a rise in the dollar and U.S. yields hit most other emerging assets.
Emerging currencies and the main equity index slipped but were on track for weekly gains with the share index set for its biggest weekly rise since mid-July.
In Russia, the central bank held its main interest rate steady for the 12th month in a row but cut a secondary rate on overnight loans, surprising many who had thought that a government decision to freeze utility prices in 2014 gave room for a rate cut.
The rouble inched higher after trading 0.3 percent lower before the meeting, but stayed off Thursday's seven-week highs.
"Notwithstanding weak GDP growth, consumer inflation at 6.5 percent remains above the Bank's 5.0-6.0 percent target, and this would have been a key consideration in the decision to refrain from reducing headline rates," Tradition Economics said.
Russian stocks fell 1 percent as Brent crude tumbled to $111 a barrel, over $5 off recent highs.
Elsewhere, currencies and stocks mostly weakened as market jitters grew before next week's Federal Reserve meeting when the U.S. central bank could announce it is scaling back its stimulus programme. That could reduce capital flows to emerging markets, although a gradual withdrawal has been largely priced in.
A series of relatively robust economic data from some emerging markets had also shored up sentiment in recent sessions towards the sector, along with hopes that a U.S. recovery would give a boost to developing countries as well.
Emerging equities have risen more than 3 percent this week, and were on course for their second straight week of gains, but the index was down 0.5 percent on the day with the mood dampened by a rise in the dollar and a 4 basis-point rise in the 10-year U.S. yield.
Chinese shares fell 0.7 percent but were on track for their best week since February.
The Polish zloty firmed 0.2 percent to the euro before inflation data that could further confirm the tentative economic recovery. A higher-than-expected reading would fuel speculation of a rate hike from current levels of 2.5 percent.
"Economic conditions have improved considerably, there is definitely an economic recovery on the way. Markets are expecting rate hikes on the far horizon - in the second half of 2014. If CPI comes on the upside, those expectations could be brought forward," said Commerzbank strategist Thu Lan Nguyen.
ASIAN CURRENCIES DIP
Earlier in the day, Asian currencies fell though they are on track for healthy weekly gains.
Indonesia's rupiah was in focus, falling despite a surprise interest rate hike on Thursday. The currency has lost around 15 percent of its value against the dollar this year.
Continued rupiah weakness again forced the central bank to intervene while one-month non-deliverable rupiah forwards slid 1.5 percent to 11,295 to the dollar.
The Indian rupee, which has been at the forefront of the recent selloff in emerging currencies along with the rupiah, opened lower but was up more than 2 percent against the dollar this week. Short positions in the Indian currency are at four-month lows, a Reuters poll showed. (For GRAPHIC on MSCI emerging index performance 2013, see http://link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2013, see http://link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2013, see http://link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see ) (Additional reporting by Carolyn Cohn; Editing by Susan Fenton)