* Dollar index hits 13-month high
* Turkish lira extends bounce but many early gains fizzle
* Stronger dollar pressures commodities, copper, gold, oil slide
* World stock index down 1.3 pct, EM stocks slump 2 percent (Updates with U.S. open; adds commentary, changes dateline; previous LONDON)
By Sin?(C)ad Carew
NEW YORK, Aug 15 (Reuters) - Equities around the world took a dive on Wednesday, with emerging market stocks set to confirm a bear market and the dollar hitting a 13-month high, while weakness in China's yuan rattled investors' nerves.
While fears of a crisis in Turkey still loomed, China was in sharp focus as the yuan CNH=EBS sagged nearly 0.8 percent to 6.9467 per dollar, hitting its weakest level since January 2017 following disappointing economic data earlier this week. L5N1V645W
The data stoked speculation whether the People's Bank of China would intervene with more fiscal stimulus to stem its currency from breaking through the 7-yuan mark. investors are waking up to the idea that the situation in China may be pretty impactful as far as global markets go," said Emily Roland, head of capital markets research at John Hancock Investments.
"With China being the engine of global economic growth, if you start to see their currency weaken significantly because of the slowdown we're seeing there and you start to see the dollar meaningfully increase, there could become a point where there's a liquidity issue globally," Roland added.
Turkey's lira eked out a second day of gains as authorities tightened the screws on foreign investors aiming to short the currency But the country's failure to tackle galloping inflation kept investors fearful that Turkey was headed for full-blown crisis and debt defaults.
Investors stepped up safe-haven holdings of the U.S. dollar due to worries about China and Europe's exposure to Turkey, which pushed the euro to its weakest level in over a year.
The dollar index .DXY rose 0.07 percent, with the euro EUR= down 0.1 percent to $1.1331.
"The dominant theme in financial markets at the moment is the strength of the dollar," said Sunil Krishnan, Aviva (LON:AV) Investors head of multi-asset funds. "We see scope for that move to continue.
"One of the big challenges to risk appetite in markets is if the dollar moves continue and put pressure on riskier assets such as emerging market bonds and so on," he added.
MSCI's emerging equities index .MSCIEF was last down 2 percent from Tuesday, after having fallen more than 20 percent from its January intraday high earlier in the day. Latin American currencies also slid along with commodities.Dow Jones Industrial Average .DJI fell 264.95 points, or 1.05 percent, to 25,034.97, the S&P 500 .SPX lost 31.73 points, or 1.12 percent, to 2,808.23 and the Nasdaq Composite .IXIC dropped 128.41 points, or 1.63 percent, to 7,742.48.
The pan-European FTSEurofirst 300 index .FTEU3 lost 1.59 percent and MSCI's gauge of stocks across the globe .MIWD00000PUS shed 1.32 percent.
The CBOE Volatility Index .VIX , Wall Street's so-called "fear gauge," jumped to a more than six-week high of 16.86, showing rising demand for protection against a near-term drop in U.S. stocks. The index was last up 2.9 points at 16.21.
Benchmark 10-year notes US10YT=RR last rose 12/32 in price to yield 2.8533 percent, from 2.895 percent late on Tuesday.
The backdrop to all this is the escalation in global trade tensions, with Beijing lodging a complaint to the World Trade Organization to determine the legality of U.S. tariff and subsidy policies. has also raised tariffs on some U.S. products "in response to the U.S. administration's deliberate attacks on our economy", Vice President Fuat Oktay wrote on Twitter.crude oil CLcv1 fell 3.36 percent to $64.79 per barrel and Brent LCOcv1 was last at $70.61, down 2.55 percent on the day.