By Sujata Rao
LONDON, Sept 22 A dovish U.S. Federal Reserve
message gave emerging markets renewed impetus on Thursday,
pushing the benchmark equity index to two-week highs while
currencies firmed, led by the South African rand hitting
The Fed signalled a rate hike by year-end, but cut the
number of increases expected in 2017-2018. It also reduced its
longer-run interest rate forecast to 2.9 percent from 3 percent,
leaving investors confident the pace of policy tightening would
be glacial at best.
As the dollar retreated, emerging assets jumped.
MSCI's emerging equity index rose 1 percent, extending
Wednesday's 0.8 percent gain. Currencies added to
strong gains made against the greenback immediately after the
Fed message, shaking off jitters from earlier in the week.
Asian currencies rose across the board versus the dollar
"Our view has been that both the BOJ (Bank of Japan meeting)
and the Fed would be non-events and people would come back to
buy," said David Hauner head of EEMEA Cross-Asset Strategy &
Economics at Bank of America Merrill Lynch.
"Many clients have been receiving inflows, some of which
were not invested because investors thought the rally had gone
too far, too fast and had been waiting for a pullback to buy."
The South African rand, among the most sensitive to dollar
moves, added 1 percent after rising 2.5 percent in the
previous session and the rouble firmed slightly after
strengthening 1.5 percent.
The rand is also basking in recent better-than-expected data
on South Africa's growth, current account and inflation, which
has left investors confident the central bank will hold off
raising interest rates.
Benchmark bond yields fell to one-month lows ahead of a
central bank meeting on Thursday.
Meanwhile the Turkish lira rose 0.3 percent to two-week
highs, but gains were limited by expectations the central bank
would cut the upper limit of its interest rate corridor by 25
basis points (bps).
Standard Chartered advised buying emerging currencies,
singling out the lira which has lagged the rally because of a
tourism slump and political concerns after a failed coup.
"As political tensions ease we see a likely reversal of
both, with the potential for significant catch-up in what are
now underweight investor positions," Standard Chartered said.
"We think investors should look for opportunities to build long
lira positions, both on an outright and relative value basis."
In central Europe, the zloty hit 7-week highs against the
euro while the forint approached 6-1/2-month peaks and bourses
in both countries rose around 0.7 percent
Investors also awaited a central bank meeting in Egypt that
is expected to raise interest rates by at least 50 bps and
possibly signal the timing of a mooted currency devaluation
Emerging Markets Prices from Reuters
Equities Latest Net Chg % Chg % Chg
Emrg Mkt Indx 917.10 +11.45 +1.26 +15.48
Czech Rep 868.09 +3.32 +0.38 -9.23
Poland 1769.75 +11.28 +0.64 -4.81
Hungary 28452.83 +198.49 +0.70 +18.95
Romania 7013.68 -22.68 -0.32 +0.13
Greece 568.36 +6.24 +1.11 -9.98
Russia 987.50 +7.96 +0.81 +30.44
South Africa 44667.18 +382.55 +0.86 -2.47
Turkey 79180.67 +1264.78 +1.62 +10.39
China 3042.69 +16.81 +0.56 -14.03
India 28752.60 +245.18 +0.86 +10.09
Currencies Latest Prev Local Local
close currency currency
% change % change
Czech Rep 27.01 27.03 +0.08 -0.03
Poland 4.29 4.29 +0.08 -0.63
Hungary 307.11 307.95 +0.27 +2.45
Romania 4.45 4.45 +0.04 +1.58
Serbia 123.18 123.26 +0.06 -1.39
Russia 63.89 63.89 +0.00 +14.17
Kazakhstan 337.70 338.00 +0.09 +0.83
Ukraine 25.85 25.89 +0.15 -7.34
South Africa 13.41 13.57 +1.15 +15.27
Kenya 101.10 101.20 +0.10 +1.09
Israel 3.76 3.76 +0.09 +3.49
Turkey 2.95 2.95 +0.29 -0.98
China 6.67 6.67 +0.00 -2.66
India 66.74 66.73 -0.01 -0.81
Brazil 3.21 3.21 -0.18 +23.29
Mexico 19.63 19.74 +0.56 -12.51
Debt Index Strip Spd Chg %Rtn Index
Sov'gn Debt EMBIG 357 -1 .32 7 69.79 1
All data taken from Reuters at 08:47 GMT.
Currency percent change calculated from the daily U.S.
close at 2130 GMT.
For GRAPHIC on emerging market FX performance 2016, see link.reuters.com/jus35t
For GRAPHIC on MSCI emerging index performance 2016, see link.reuters.com/weh36s
For GRAPHIC on MSCI emerging Europe performance 2016, see link.reuters.com/jun28s
For GRAPHIC on MSCI frontier index performance 2016, see link.reuters.com/zyh97s
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )
(Editing by Mark Potter)