* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh
* Graphic: Trade-weighted sterling since Brexit vote tmsnrt.rs/2hwV9Hv
LONDON, Sept 14 (Reuters) - Sterling rose on Friday and is set for its second biggest weekly rise in 2018 as imminent concerns over the outlook of emerging markets faded after Turkey’s sharp rate hike and after the central bank upgraded growth forecasts at a policy meeting.
Apart from news over the progress of Brexit negotiations, the British currency has become increasingly correlated to risk appetite in recent weeks and concerns over a widening emerging market currency selloff has also weighed on sterling.
On Friday, sterling rose 0.2 percent to $1.3139 to its highest level since Aug. 1. On a weekly basis, it is up more than 1.5 percent, its biggest weekly rise so far this year.
“It has been a good week for high beta currencies including the pound thanks to Turkey and growth upgrades by the Bank of England but it is still too soon to flip to net long bets,” said Kenneth Broux, a currency strategist at Societe Generale in London.
The BoE voted 9-0 to leave interest rates at 0.75 percent, a month after tightening policy for only the second time since the 2009 financial crisis and upgraded its forecast for third-quarter GDP growth, to 0.5 percent from 0.4 percent.
An interest rate rise by Turkey’s central bank to support a tumbling lira boosted risk appetite in emerging markets.
The bank raising its benchmark interest rate by 625 basis points to 24 percent sent an index tracking emerging market currencies to near three-week highs on Friday.
Its fortunes were more mixed against the euro as lower-than-forecasted U.S. inflation data pushed the single currency higher. The pound was a shade weaker against the euro at 89.22 pence.
Weaker U.S. inflation data continued to hurt the dollar. The U.S. consumer price index, the government’s broadest inflation gauge, rose just 0.2 percent in August and less than the 0.3 percent projected by analysts in a Reuters poll.
In the cash markets, hedge funds remain negative on the British currency, according to latest positioning data, showing a net $5.5 billion outstanding short position though the size of that position reduced slightly last week. (Reporting by Saikat Chatterjee; Editing by Janet Lawrence)