* Russian rouble up 0.4%; c.bank expected to stand pat * Lira extends rally after 200 bps rate hike * EM FX index set to break four-week losing run March 19 (Reuters) - Emerging market stocks were set for their worst session in two weeks on Friday, hurt by rising U.S. bond yields and souring Sino-U.S. talks, while investors also awaited the Russian central bank’s monetary policy stance due later in the day. Russia is expected to stand pat on rates, but prepare markets for an imminent rate increase amid high inflation and lingering geopolitical risks. This comes after Turkey’s central bank hiked rates by 200 basis points to 19% on Thursday, sending the lira up more than 2% in response and putting it back in positive territory for the year. The lira on Friday extended gains, up 1%, while Russia’s rouble firmed 0.4% ahead of the country’s central bank decision due at 1030 GMT. A recovery in oil prices after a 7% slump also helped the crude exporting nation’s currency. The rouble is set for its worst week in two months as a report alleging Russian involvement in the U.S. 2020 election heightened tension between the two nations with Washington expected to impose sanction on Moscow as early as next week. The sanctions threat and rising U.S. Treasury yields have raised market expectations for a 25 bps hike on Friday, Credit Suisse analyst Alexey Pogorelov said, but added that the firm still expects Russia to wait till next month to tighten its monetary policy. South Africa’s rand rose 0.8%, and most Asian currencies trimmed losses as the dollar slipped. An index of EM currencies is on track to break a four-week losing streak and end marginally higher on the week, as riskier currencies broadly got a boost from the U.S. Federal Reserve maintaining its dovish stance. Developing market stocks tipped into the red for the week, with Chinese blue-chips losing 2% on Friday, while Turkey, Russia, South Africa and Poland fell between 0.5% and 0.7%. After a sharp sell-off on Wall Street on a bond yield spike on Thursday, the first high-level U.S.-China talks of the Biden administration started on a fiery note, with both sides levelling sharp rebukes of the others’ policies. “The tone will raise investor fears that U.S.-China relations are likely to remain tense over the coming years, in spite of the change in administration in the United States,” said Deutsche Bank strategists in a note. Geopolitical tensions and a consequent trade war between the two nations under former U.S. President Donald Trump’s administration had hammered financial markets and contributed to a slowdown in global growth. 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 For TOP NEWS across emerging markets For CENTRAL EUROPE market report, see For TURKISH market report, see For RUSSIAN market report, see (Reporting by Susan Mathew in Bengaluru; Editing by Ramakrishnan M.)