Emerging Markets Surge Amid U.S. Fed's Aggressive Rate Cuts

Emerging market stocks and currencies saw their biggest gain in five weeks following a significant interest rate cut by the U.S. Federal Reserve. The MSCI index for EM stocks was poised for its steepest weekly gain since August, and the currencies index hit a record high before stabilizing. Market optimism surged due to the Fed's aggressive rate cut, encouraging risk appetite globally.

Emerging market stocks and currencies posted their largest advance in about five weeks, driven by enthusiasm over a wider-than-expected interest rate cut by the U.S. Federal Reserve. This has led to a surge in investor interest towards high-risk assets.

According to the MSCI index, EM stocks rose 0.7%, reaching a near one-month high and achieving the steepest weekly gain since August 12. The currencies index also hit a record high during the day before turning flat, yet it remained set for its best weekly performance since August 19.

The global risk appetite was bolstered by the U.S. central bank's initiation of a series of rate cuts with an aggressive half-percentage-point reduction on Wednesday. Policymakers are projecting an additional 50-basis-point cut by the end of the year. Citi analysts noted that this aggressive move has raised market expectations for a soft economic landing.

(With inputs from agencies.)