By Sujata Rao LONDON, Sept 22 (Reuters) - 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 one-month highs. The Fed signaled 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 on year Morgan Stanley 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 in 2016 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 http://link.reuters.com/jus35t For GRAPHIC on MSCI emerging index performance 2016, see http://link.reuters.com/weh36s For GRAPHIC on MSCI emerging Europe performance 2016, see http://link.reuters.com/jun28s For GRAPHIC on MSCI frontier index performance 2016, see http://link.reuters.com/zyh97s For CENTRAL EUROPE market report, see For TURKISH market report, see For RUSSIAN market report, see ) (Editing by Mark Potter)
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