File picture: Independent Media

London - Emerging currencies firmed against the dollar on Wednesday, with some hitting multi-month highs on expectations of a dovish message from the US Federal Reserve later in the day.

Emerging equities were largely unchanged, with China and Hong Kong still closed for holidays and investors preferring to stay on the sidelines amid the turmoil in global banking shares. A stronger opening for European bourses may provide some support, especially for central European markets.

The asset class could gain some traction if Fed boss Janet Yellen signals a slower pace of rate rises given fears about the U.S. economic recovery and the equity turmoil. As the dollar languished near 3-1/2 month lows, the Indonesian and Thai currencies hit four-month highs .

Per Hammarlund, head of EM strategy at SEB in Stockholm, said that while many appeared positioned for a dovish Fed message, the latest gains were broadly down to “herd mentality and low liquidity.”

“The first part of the week was dominated by falls, but the mood and sentiment seems to have turned and the markets are bouncing. There are few real hard indicators that would suggest the fall or the bounce,” he said.

In emerging Europe, the rouble and rand rose more than 1 percent , while the Turkish lira firmed half a percent.

The zloty and Hungarian forint rose around 0.3 percent to the euro . Polish stocks rose 1 percent on back of gains in Western Europe, shrugging off warnings from the central bank about the potential impact of the government's Swiss franc loan conversion plan.

On bond markets, local Asian debt made some gains with Thai 10-year yields at 15-year lows and Indian yields at two-month lows, but sovereign dollar bond premia were at the highest in nearly seven years after rising 7 basis points on Tuesday .

Ukrainian bond yield spreads over Treasuries were at 1 000 basis points (bps) - back at levels denoting distress - after rising more than 50 bps on Tuesday on the EMBI Global index. A brewing political crisis has fanned fears for the country's international bailout.

A $3 billion debt owed to Russia also remains a threat, with Moscow saying a restructuring proposal sent to it was worse than what was accepted by the private sector last year.

“With concerns over domestic political stability in Ukraine, the country does not need further uncertainty around this issue,” Nomura analyst Tim Ash told clients.

Ukraine's hryvnia currency stayed near one-year lows against the dollar, with the central bank set to auction $30 million to protect the exchange rate.

In fellow former Soviet state Azerbaijan, the central bank also sold dollars to lift the manat.