* MSCI EM stocks, FX indexes set for weekly losses

* India holds rates, unveils currency measures

* Turkey inflation tops forecasts

* Indonesian rupiah hits new low

* South Korean won at weakest since 2009

By Avinash P

June 5 (Reuters) - An index tracking emerging market

stocks slipped on Friday, weighed down by heavyweights South

Korea and Taiwan as the AI rally paused, while a stalemate in

Middle East diplomacy curbed risk sentiment further.

The MSCI index of EM stocks fell about 2% and the

currencies gauge was flat, but both are on track

for weekly losses.

Iranian-backed Hezbollah militia rejected a new ceasefire in

Lebanon and Israel said it would not withdraw troops from the

country, undermining hopes to achieve a broader peace deal in

the Middle East.

"The initial positive impulse came from hopes that the Iran

war could move toward de-escalation. But the same story was

already fragile: Hezbollah rejected the deal and Israel said it

would not withdraw troops from Lebanon, keeping the broader

U.S.-Iran peace path uncertain," said Florian Ielpo, head of

macro at Lombard Odier Investment Managers.

South Korea's AI-heavy benchmark index fell 5.5%,

while the Taiwanese bourse declined 1.3% tracking a

global AI pullback.

Both markets had rallied to record levels powered by an AI

boom that lifted the broader MSCI gauge to new peaks.

Sentiment was cooled by disappointing results from Broadcom ( AVGO )

, whose shares plunged 12% on Thursday and triggered a

semiconductor selloff on the Nasdaq.

In currencies, Indonesia's rupiah opened at a fresh

low but was last flat, and South Korea's won fell 0.4% to

its lowest level since March 2009.

The Reserve Bank of India held its policy rate steady on Friday,

as expected, and unveiled steps to control currency outflows

that have worsened in the wake of the Iran conflict.

The country said it would exempt foreign institutional investors

and the Bank for International Settlements from capital gains

tax on receipts arising from interest or sale of government

securities. The rupee appreciated 0.8%.

However, local stocks reversed earlier

gains to trade lower.

"But it is clear that rupee weakness remains a concern

and, with inflationary pressure also building, we think it is

only a matter of time before the central bank begins a hiking

cycle," said Shilan Shah, deputy chief emerging markets

economist at Capital Economics.

Turkey's inflation was slightly higher than expected in May at

1.71% monthly and up to 32.61% annually, official data showed.

The Turkish benchmark fell 0.9% following the

reading, while the lira slipped 0.3%.

In Africa, South African equities added 0.5% and

the rand was flat.

Most emerging European currencies were little changed

against the euro.

Stocks in Hungary edged 0.9% higher, while Polish

equities fell 0.8% and the Romanian benchmark was

flat.

HIGHLIGHTS:

** South Korea labour minister calls on tech firms to share

excess AI profits with suppliers, staff

** Indian companies willing to deepen presence in Venezuela,

India's oil minister says

** China's central bank resumes cash injection following a

two-day hiatus

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