Emerging currencies have been under pressure in the face of dollar strength, but domestic woes have accentuated the losses in some markets, with the lira tumbling 0.7 percent to a record low on signs of more discord between Turkey and Europe.

President Tayyip Erdogan has accused Belgium of being a centre for supporters of the outlawed Kurdistan Workers Party (PKK) and the cleric who Ankara says orchestrated a failed July coup. He has also accused Germany of not being committed to the fight against terrorism.

Roxana Hulea, a strategist at Societe Generale, said the lira was likely to remain under pressure.

"We do consider Turkey as being one of the least protected during this renewed pressure on EM," she said.

The Chinese yuan also hit an eight-year low as the central bank set a weaker daily guidance rate.

Commerzbank noted that after the yuan`s inclusion in the special drawing rights basket of currencies in October, the yuan had depreciated by more than 3 percent, triggering concerns over a possible collapse.

"It is hardly the case, in our view. On one hand, (the yuan) index is generally stable since August, suggesting (its) weakness reflects a broad U.S. dollar strength."

But the bank`s analysts also noted China`s foreign reserves had dropped for four consecutive months since mid-2016, indicating that the central bank was still actively intervening in the market. The yuan has depreciated 5.4 percent against the dollar so far this year.

The Mexican peso, which has been pummelled hardest by Republican Donald Trump`s shock U.S. election win last week, slipped 0.3 percent from a six-day high, after gaining 2 percent on Tuesday. Analysts expect the volatility to continue until there is more clarity on Trump`s policies.

"It is a market consensus that the peso is undervalued, but because it is at the eye of the storm it is very difficult to advocate bottom fishing at this point," said Hulea.

The Russian rouble also weakened against the dollar, down 1.9 percent, as investors eyed developments in the government following the dismissal of the economy minister over allegations of corruption.

Stocks fared better with MSCI`s benchmark emerging equity index up 0.5 percent, moving further off four-month lows, while emerging dollar bonds` average yield premium over Treasuries shrank to 360 basis points (bps), almost 30 bps off the highs touched earlier this week.

U.S. 10-year yields were around 10 basis points off the 10-month highs hit earlier this week, providing some respite for riskier assets.

Commodity producers led gains in stock markets, with South Africa shares up 1.8 percent and Russian dollar-denominated shares up 0.7 percent.

Commodity prices have risen over the past week on expectations of improved demand from China and the United States, which is planning to patch up its crumbling infrastructure.

Indian bond yields fell sharply again to hit fresh seven-year lows as cooling retail inflation bolstered hopes of an interest rate cut by the central bank next month.

In emerging Europe, the Polish zloty fell 0.7 percent against the euro underperforming neighbouring currencies a day after data showed economic growth slowing to a below-forecast 2.5 percent in the third quarter.

London-listed shares in Kazakhstan`s Halyk Bank fell 1.6 percent after Reuters reported it was discussing a merger with its smaller rival Kazkommerzbank to create a lender with $27 billion in assets.

More about: