*

Polish manufacturing slump eases only marginally

*

Yuan drops despite banks' dollar sales, strong guidance

*

Taiwan stocks end at record high

*

EM stocks up 0.7%, FX down 0.1%

By Bansari Mayur Kamdar

April 2 (Reuters) - The Polish zloty weakened on

Tuesday, after the Eastern European economy's manufacturing

activity contracted again last month, while a rally in Hong Kong

equities lifted the emerging market stocks index.

The zloty eased 0.3% against the euro, snapping a

three-day gaining streak, as a survey showed muted demand last

month, both domestically and from Western Europe, ate into

production.

S&P Global's Polish manufacturing Purchasing Managers' Index

(PMI) inched up to 48 in March from 47.9 in February, but stayed

below the 50 mark that separates growth from contraction for the

23rd month in a row.

The Czech crown edged slightly higher after data

showed the country's manufacturing decline slowed further in

March.

Hungary's forint was little changed against the

euro after data showed its seasonally-adjusted PMI came in at

52.3 in March, unchanged from a revised February reading.

"The manufacturing PMIs rose across Central and Eastern

Europe (CEE) in March but they remain consistent with a

relatively weak recovery," Nicholas Farr, emerging Europe

economist for Capital Economics, said in a note.

The MSCI index for emerging markets currencies

inched 0.1% lower.

China's yuan fell to a 4-1/2-month low, as a robust dollar

offset greenback sales by state-owned banks and a strong

official guidance set for the local currency.

Conversely, the dollar hovered near a 4-1/2-month

peak against major peers as traders pared back bets on the

timing of the Federal Reserve's first interest rate cut after

data showed an unexpected expansion in U.S. manufacturing.

Suspected Israeli warplanes bombed Iran's embassy in Syria

on Monday, keeping geopolitical tensions in focus.

The Russian rouble weakened against the

dollar after another Ukrainian drone attack on a refinery deep

in Russian territory and as reduced foreign currency supply from

exporters also weighed.

South Africa's rand ticked 0.5% higher against the

dollar before the release of manufacturing and vehicle sales

data.

The Hang Seng gained 2.2%, led by energy and

technology shares, boosting MSCI's index for emerging market

stocks. Also supporting the index, Taiwan stocks

closed at a record high amid higher inflows into Asian

equities.

Turkish stocks added 0.9%, with its banking index

jumping 2%.

The Turkish Central Bank's net reserves rose around $1

billion last week, bankers said, with recent declines halting

after last month's interest rate hike.

In South Asia, Indian shares slipped from record highs as

rate-sensitive information technology (IT) stocks weighed. The

rupee gained, ducking the weakness in its Asian peers on

expectations of the central bank's intervention.

The World Bank raised its forecast for Sri Lanka's economy,

projecting growth of 2.2% for 2024 as the crisis-hit nation

makes a faster-than-expected recovery.

HIGHLIGHTS:

** Chinese state banks sell dollars as yuan hits 4-1/2-month

low, sources say

** Traditional pre-election rally eludes Indian stocks

** Polish manufacturing slump eases fractionally, PMI shows

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