* MSCI EM FX flat, stocks set for weekly gains

* Turkey's stocks set for sharpest weekly fall in a year

* Indonesian equities on track for steepest weekly fall

since 2022

By Avinash P and Purvi Agarwal

May 22 (Reuters) - Emerging market currencies were mixed

on Friday and most equities gained as investors weighedprospects

fora peace deal in the Middle East even as great uncertainty

persisted, while Turkish assets were in focus after another blow

to the country's opposition.

MSCI's index tracking global EM stocks added 0.7%,

set for weekly gains, while the currencies gauge

was flat.

A court effectively ousted the main opposition leader in

Turkey late on Thursday, annulling the 2023 party congress that

elected him chairman, boostingPresident Tayyip Erdogan's chances

of extending his rule.

"With this political risk, it gives the impression that

maybe in a situation that is less positive for Turkey... Erdogan

could change his economic policies," said Guillaume Tresca,

global EM strategist at Generali Asset Management.

"I used to like this carry trade very much, but clearly now

the risk-reward is less appealing than before."

Turkey's BIST 100 fell as much as 6% following the

ruling, triggering a market-wide circuit breaker. On Friday, the

index was up 1.5% in volatile trading, still set for its biggest

weekly fall in a year.

The lira depreciated 0.4% to a record low of

45.74 per dollar.

Iranian media reported the nation's foreign minister met

Pakistan's interior minister to discuss proposals to end the

war. Despite ongoing talks, uncertainty persisted as the U.S.

and Iran held opposing stances on key issues, including on

enriched uranium and control over the Strait of Hormuz.

Heavyweight Asian stocks rose broadly. Taiwan equities

led gains with a 2.2% rise, riding investors' insatiable

appetite for AI-linked stocks.

On the flip side, concerns around Indonesia's fiscal health

amid elevated crude prices and plans to centralize commodity

exports pressured the nation's assets this week.

Local stocks rebounded 1.1% after eight sessions of

declines, but were on track for their biggest weekly decline

since May 2022. The rupiah was close to record lows hit

in the previous session at 17,690 versus the dollar.

Tresca said that the macro story in Asian economies had been

resilient, with positive AI momentum, but a prolonged closure of

the Strait of Hormuz would start to hurt at some point.

Emerging European equities rose, tracking global market

sentiment. Polish stocks gained 0.6%, while Hungarian

and Romanian bourses dipped 0.2% each.

Their currencies were largely subdued against the euro,

while Hungary's forint continued to weaken, down 0.6%.

In South Africa, stocks were little changed and the

rand weakened 0.3%.

Moody's is scheduled to review its rating on Hungary and

South Africa later in the day.

HIGHLIGHTS:

** India central bank not in favour of rate hikes to defend

rupee, prioritises inflation, sources say

** Philippine central bank governor says it is considering

off-cycle rate hike

** Kenyan public transport operators call off strike after

government cuts diesel price

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