Emerging market assets are in positive territory due to lower fears and hopes for a smaller move by the Fed

March 17 (Reuters) – Emerging market equities and currencies rallied on Friday as concerns over medium-sized US banks led investors to lower expectations for an aggressive monetary policy tightening by the Fed next week.

The MSCI Emerging Markets Index rose 1.2% at 15:29 Moscow time, while the exchange rate gained 0.2% and could end a volatile week in the black.

The index of Asian stock exchanges, excluding Japan, was up 1.4% by 15:29 Moscow time.

Investors are pricing in a smaller 25bps monetary policy tightening by the Fed next week after the collapse of two major US regional banks and signs of trouble for First Republic Bank.

The revival in risk sentiment was boosted by the news that major US banks had placed $30 billion in deposits with First Republic Bank in an attempt to bail out the lender.

“I think there is a pretty good chance of a 25 basis point move at the moment and markets are still considering the possibility of further appreciation for EM currencies if there is a break[w podwyżkach stóp Fed]said Sean Murison of IG Markets.

The Turkish lira fell 0.2% to 19.00 per dollar, while the South African rand rose 0.1% to 18.37.

The Hungarian forint lost 0.58% against the euro and the Polish zloty 0.13%.

Meanwhile, the Czech koruna rose 0.23% to 23.92 per euro.

The mainland yuan rose 0.15% to 6.886 per dollar, offshore the Chinese currency rose 0.12% to 6.8863.

Stocks in Shanghai and Hong Kong closed in the red as investors welcomed signs of economic recovery in China.

China’s central bank said it would reduce the amount of money banks have to reserve for the first time this year to help maintain liquidity and support economic growth.

The Turkish stock index lost 1.2%, while the South African stock index gained 0.1%.

The original message in English is available at the code: (Shreyashi Sanyal in Bangalore, translated by Tomas Kanik)