London - Emerging equities snapped a two-day losing streak to jump 2.3 percent on Thursday and currencies rose against the dollar as the fading prospect of more near-term US rate rises pushed the greenback to three-month lows.
The MSCI emerging market benchmark was lifted by stellar gains in Asia as well as an oil-fuelled rise in Russia as crude prices jumped above $35 a barrel, adding to a 7 percent rise on Wednesday.
The advances came after New York Federal Reserve President William Dudley signalled a slower pace of interest rate rises ahead. The dollar index fell half a percent.
“A lot of the heavily bearish EM sentiment that we've seen will be questioned a bit because we're pricing in a more sanguine Fed view,” Peter Kinsella, head of EM research at Commerzbank, said, adding the heavy positioning in favour of a stronger dollar meant potentially more weakness ahead.
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“It's a stretch to say that suddenly implies emerging markets are going to do really well...We're still in a world of sub-trend growth so that's not good news for EM assets in a broader sense, and volatility remains quite high.”
Dollar-denominated stocks in Moscow rose as much as 6 percent while bourses in South Africa, Turkey and Poland all firmed around 1.5 percent.
In Asia, Chinese mainland shares ended around 1.5 percent higher after hitting the highest level in more than a week. Gulf stocks also rallied, with Riyadh and Dubai up 1.6 percent and 3 percent respectively .
On currency markets, Russia's rouble, the South African rand and Turkey's lira both extended the previous session's gains and strengthened half a percent. Earlier in Asia, the Malaysian ringgit jumped 2 percent and the Korean won firmed 1 percent.
While central European currencies were broadly firmer against the euro, the Czech crown traded flat ahead of the central bank's interest rate decision. The bank is seen sticking to record low interest rates, and keeping the crown weak into 2017.
The outlier was Ukraine, where the hryvnia weakened 0.8 percent to its lowest level in almost a year and dollar-denominated bonds took another leg lower.
On Wednesday, Ukrainian Economy Minister Aivaras Abromavicius resigned, saying his ministry was being hijacked by corrupt vested interests, dealing another blow to Western hopes that the ex-Soviet republic can reform itself.
REUTERS