Nov 23 (Reuters) - The lira slumped 8% to a record low of 12.49 versus the dollar on Tuesday on intensifying worries about Turkey"s unconventional monetary policy, while Russia"s rouble recovered but worries about a war with Ukraine kept it at four-month lows. Turkish President Tayyip Erdogan, long demanding stimulus to spur economic growth, defended lower policy rates on Monday, vowing to succeed in his "economic war of independence". The policy rate now stands at 15% while inflation runs at 20%. Speculation that Erdogan might soon replace Finance and Economy Minister Lutfi Elvan further fanned worries. read more The lira , is now down more than 37% against the dollar in 2021, significantly lagging other emerging market peers, with volatility gauges spiking. "We would have to really start to see strains building in the banking sector (.XBANK) before we might get a change in course. So far banks have been weathering this really well. So long as that remains the case, I suspect the central bank will not raise rates," said Jason Tuvey, senior EM economist at Capital Economics, adding the lira may fall beyond 13. Russia"s rouble recovered 0.5% against the greenback after sliding close to 75 last session on Western concerns over possible Russian military intervention in Ukraine. read more The market sell-off hit Russian OFZ treasury bonds. Yields on 10-year benchmark OFZs soared to 8.63% this week, a level last seen in early 2019. The United States imposed further sanctions in connection with the Nord Stream 2 gas pipeline on Monday, targeting Russia-linked Transadria Ltd and its vessel. read more "In the event that Russia does try to make an incursion into Ukraine, the risk of sanctions would escalate quite quickly if the rouble does come under severe pressure, we might see the central bank stepping with interest rate hikes," said Tuvey. Ukraine dollar bonds , slumped to one year lows. In Belarus, the rouble hit over three-month lows as a migrant crisis deepened. Austria said Europe must not be blackmailed into accepting thousands of migrants stranded on its border with Belarus, after Belarusian President Alexander Lukashenko threatened war if the crisis goes "too far". read more Risk sentiment was more broadly hit after U.S. President Joe Biden picked Federal Reserve chief Jerome Powell to lead for another term, raising bets that the central bank may tighten policy faster than expected, which could pull funds away from EM assets. EM stocks (.MSCIEF) hit six-week lows, with some gains in mainland China, India, Turkey and Russian stocks capping losses. Central banks in developing economies ramping up interest rates will be supportive for emerging market debt, but could spell trouble for equities, BlackRock said on Monday. read more For GRAPHIC on emerging market FX performance in 2021, see http://tmsnrt.rs/2egbfVh For GRAPHIC on MSCI emerging index performance in 2021, see https://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 William Maclean Our Standards: The Thomson Reuters Trust Principles.