LONDON: Emerging equities rose nearly 1 percent on Wednesday, tracking oil, late-session gains on Wall Street and a retreat in the dollar ahead of what could be a dovish signal from the U.S. Federal Reserve.
Renewed oil price falls hit the Russian rouble, which slipped half a percent before recovering, with most other emerging currencies little changed against the dollar.
The greenback fell 0.4 percent against major currencies before the Fed meeting, which many expect signal very slow policy tightening because of market turbulence.
Chinese mainland stocks closed half a percent lower but gains in Hong Kong helped to lift MSCI's broad emerging index higher. Analysts downplayed the rise, noting the overwhelmingly bearish positioning on emerging stocks, which have fallen 10 percent this year.
"If the Fed came out rather dovish, delayed any potential rate hikes, etc, that would lead to something of a rally. So I think it's just short-covering ahead of the Fed," said Peter Kinsella, head of EM strategy at Commerzbank.
Russian and Gulf stocks rose, catching up with Tuesday's late oil rally, which has since fizzled out. The rouble, however, remained under pressure and 10-year bond yields stayed near three-month highs.
Russia's economy minister revealed a 3.8 percent economic contraction in 2015 and President Vladimir Putin is expected to chair a government meeting on a $22 billion plan to protect the economy.
Kinsella said that low oil prices are hammering the rouble and forcing bond markets to price out interest rate cuts. The central bank meets on Friday but is expected to leave rates on hold.
"Last year the central bank was able to cut rates by arguing that inflation would come a lot lower, but that doesn't seem to be the case. So you're seeing the rouble lose ground not just because of the oil story but also because of this inflation issue. So it's a fairly safe bet to expect further rouble weakness," he added.
In fellow oil exporter Nigeria, three-month dollar/naira non-deliverable forwards (NDFs) fell a further 0.6 percent to one-month lows of 226 after the central bank quashed talk of a short-term currency devaluation.
Nigerian stocks fell 1.3 percent
Egypt, also struggling to maintain a fixed exchange rate for the pound, is likely to do the same at its central bank meeting later in the day, though it raised limits on forex bank deposits on Tuesday to help to relieve a dollar shortage.
In central Europe, the Polish zloty fell half a percent against the euro but stayed off four-year lows hit recently after a ratings downgrade from Standard and Poor's.
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