CORRECTED-EMERGING MARKETS-FX, stocks drop on inflation anxiety ahead of U.S. data

(Corrects bullet point to index weighed down by Asian heavyweights)

* Higher Treasury yields, dollar, weigh on EM currencies

* EM stocks index weighed down by Asian heavyweights

* Israeli shekel down as Gaza violence intensifies

By Shashank Nayar

May 12 (Reuters) - Emerging market currencies and stocks suffered on Wednesday as fears over rising price pressures fuelled bets on earlier interest rate hikes and underpinned the dollar and global yields ahead of U.S. inflation data.

MSCI's index of emerging market currencies .MIEM00000CUS slipped 0.2%, falling for a second consecutive session, while stocks .MSCIEF fell 0.6% to its lowest since late-March, as tech shares across the globe sold off.

Asian heavyweights were the biggest drag on the MSCI equity index, with Taiwan's main index .TWII tumbling as much as 8.5% on a mix of tech woes and COVID fears before recovering some losses. dollar rose from a two-month trough, while U.S. Treasury yields gained on anticipation of the inflation reading at 1230 GMT.

A stronger-than-expected reading could see the Federal Reserve shortening its timeline to begin tapering policy, which would result in higher U.S. interest rates and pressure risk-driven assets. Global stock markets, particularly technology stocks, plummeted on this sentiment. MKTS/GLOB

"The global stock sell-off has continued on fears that rampant commodity prices and higher inflation – driven by the recovery from the pandemic – will lead to higher rates around the world," said Hasnain Malik in a note to clients.

Still, the Fed has exuded largely dovish signals due to weakness in the labour market, which weighed on the dollar and saw EM currencies scale record highs this week.

"Expectations are for strong advances in both the headline and core rates, which may raise speculation that the Fed should start normalizing its policy earlier," said Charalambos Pissouros, senior market analyst at JFD Group.

"That said, with the U.S. employment report disappointing on Friday, it seems that Fed officials may not be in a rush to alter their policy any time soon."

South Africa's rand ZAR= firmed 0.1%, hovering around a 16-month high against the dollar, as it continued to benefit from relatively higher interest rates, and strong gains in the prices of resources exported by the country.

Turkey's lira TRY= was the biggest loser in Europe, the Middle East, and Africa, falling 0.5%.

Losses in the Russian rouble RUB= were limited ahead of two OFZ treasury bond auctions, while the weakening global dollar and a slight revival in oil prices offered some support. O/R

Most Central European currencies were subdued against the euro with Hungary's forint EURHUF= and Polish zloty EURPLN= nearly unchanged, while the Czech crown EURCZK= dropped 0.2%.

Israel's shekel ILS= dropped 0.2% after its worst loss in nearly four months on Tuesday, as hostilities between Israel and Hamas escalated with at least 35 killed in Gaza and five in Israel. 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 CENTRAL EUROPE market report, see CEE/

For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB