By Purvi Agarwal

May 11 (Reuters) - Most emerging market stocks and currencies held steady on Monday after gains in the previous week, as progress in U.S.-Iran talks on a peace deal faltered, but Asia's tech-exposed indexes advanced on AI-linked optimism.

Investor sentiment was subdued across emerging markets after U.S. President Donald Trump rejected Iran's response to a U.S. peace proposal, stalling progress on talks to end the war.

Oil prices surged again, as shipping through the crucial Strait of Hormuz, through which 20% of the world's energy shipments transit, remained choked.

"Given the gaping chasm between the two sides' negotiating positions and deep mutual mistrust, (this) should come as no surprise," said Marc Ostwald, chief economist and global strategist at ADM Investor Services.

"As long as the military conflict remains in abeyance ... the fact that they continue to negotiate ... is basically positive, though the risk of a renewed confrontation remains a real one."

Most Asian currencies edged lower against the U.S. dollar. South Africa's rand ZAR= dropped 0.2%, and Turkey's lira TRYTOM=D3 was subdued, with MSCI's gauge tracking global EM currencies .MIEM00000CUS down 0.1%.

Most currencies in emerging Europe were little changed against the euro, but the Hungarian forint EURHUF= weakened 0.8%, to its lowest level since September 2021.

On the flip side, MSCI's index tracking EM stocks .MSCIEF hit a record high, lifted largely by robust gains in Asian equities. Morgan Stanley raised its target to 1,850 for the index for the next 12 months on stronger AI/tech earnings in South Korea and Taiwan.

South Korea's Kospi .KS11 jumped 4.3% to a record high, led by a rally in chipmakers and tech stocks, with SK Hynix 000660.KS surging more than 11%.

Equity benchmarks in China .SSEC, .CS1300 gained more than 1% each, hitting their highest level in close to 11 years, while ones in Taiwan .TWII were up 0.5%.

The Chinese yuan CNY=CFXS strengthened to its highest level since February 2023 against the dollar, before retreating, after data showed China's export growth gathered pace while factory inflation hit a 45-month high in April.

Trump is scheduled to meet Chinese President Xi Jinping on Wednesday, with the agenda including trade, Iran and Russia.

Equities in Poland .WIG20 gained 0.6%, while those in Hungary .BUX fell 0.2%. Stocks in Romania .BETI surged 1.3% to a record high.

The Romanian leu EURRON= was trading at record lows hit last week after a no-confidence vote toppled the government, putting EU funds and credit ratings at risk.

Turkish stocks .XU100 were flat, while South Africa's .JTOPI slipped 0.5%, tracking lower gold prices.

Meanwhile, Russia and Ukraine accused each other of violating a three-day ceasefire, but Russian President Vladimir Putin said on Saturday that he thought the war was coming to an end.

International bonds in Ukraine gained about 1 cent on the dollar each.

HIGHLIGHTS:

** Pakistan to issue first 'Panda bond' next week, finance minister says

** IMF board clears Pakistan to access $1.32 billion

** Egypt gets additional $300 million in World Bank package for war response

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