Nov. 23 (Bloomberg) -- Developing-nation shares rose the most in a week and currencies rallied on gains for commodity prices and speculation central banks will keep interest rates low to underpin the global economic recovery.

Hungary and Poland led the equity advance after the central bank in Budapest cut interest rates to the lowest in more than three years. Budapest’s BUX Index and Warsaw’s WIG20 climbed more than 2 percent. The Micex Index of Russia, the world’s biggest energy producer, jumped 1.6 percent. Brazil’s Bovespa Index rose 0.7 percent.

The MSCI Emerging Markets Index gained 1.3 percent to 977.20 at 5:05 p.m. New York time. OAO Rosneft, Russia’s biggest oil producer, added 3.6 percent after crude prices gained. Jiangxi Copper Co., China’s biggest producer of the material, climbed more than 2 percent on speculation the government will extend measures to boost domestic demand.

All but one of the 26 emerging-market currencies tracked by Bloomberg rose against the dollar after President James Bullard of the Federal Reserve Bank of St. Louis said policy makers should keep stimulus measures in place beyond March.

The president of the Federal Reserve Bank of Chicago, Charles Evans, told the Financial Times that U.S. interest rates may stay near zero until “late 2010, perhaps later in terms of 2011.”

Israel, Hungary Rates

The Bank of Israel unexpectedly raised the benchmark interest rate for a second time since the global economy began to recover as growth accelerated and inflation approached the top of the government’s target range.

The Magyar Nemzeti Bank in Budapest lowered the two-week deposit rate to 6.5 percent from 7 percent, reducing it for the fifth consecutive month to the lowest since July 2006.

OTP Bank Nyrt. rose 4.7 percent to 5,676 forint. Hungary’s largest lender had its rating raised to “buy” from “sell” at Citigroup Inc. which cited a “more optimistic” outlook on margins, costs and provisioning in 2011 and 2012.

Commodity prices rallied as the U.S. dollar fell and the head of China’s top economic planning agency pledged to maintain stimulus policies.

China will focus on expanding domestic demand and keep “consistent, stable” macroeconomic policy including fiscal and monetary expansion, the head of the nation’s top economic planning agency Zhang Ping said today in Beijing.

The Shanghai Composite Index rose 0.9 percent to 3,338.66, the highest since Aug. 3. The Bombay Stock Exchange’s Sensitive Index, or Sensex, advanced 0.9 percent.

Jiangxi Copper gained 2.7 percent to 43.36 yuan.

Oil Gains

Rosneft, Russia’s largest oil producer, rose 3.6 percent to 257.44 rubles. OAO Gazprom, the world’s biggest producer of natural gas, added 0.6 percent to 179.11 rubles. Crude rose from a one-week low after an Iranian military exercise renewed concerns over Middle Eastern supply, while the weaker dollar heightened oil’s appeal as an inflation hedge.

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, gained 0.9 percent to 38.85 reais.

Latin America’s stock markets will rebound to almost record highs by the end of next year, with better earnings likely to boost a regional index 27 percent in 13 months, according to JPMorgan Chase & Co.

Mexico’s peso, stocks and bonds advanced even as Fitch Ratings cut the country’s credit rating one level to BBB, the second-lowest investment grade, after tumbling oil output and the worst recession since the 1930s swelled the budget deficit.

Fitch’s shift back to a stable outlook quelled speculation that the company may look to lower the rating again. The peso jumped 0.8 percent, while the Bolsa index rose 1.5 percent.

Emerging-Market Bonds

The extra yield investors demand to own developing-nation bonds instead of U.S. Treasuries shrank six basis points to 3.05 percentage points, according to JPMorgan Chase & Co.’s EMBI+ Index.

The Philippine peso and Taiwanese dollar led gains in Asian currencies. In Latin America, Chile’s peso gained 1.8 percent, the most among developing-nation currencies.

Emerging-market external bonds are undervalued and should be trading 141 basis points tighter, Bank of America Corp. said in a research report, citing calculations from its spread assessment model. Ukraine, Venezuela, Argentina and Hungary are the most undervalued credits, according to the report.

To contact the reporter on this story: Veronica Espinosa in New York at Bio vervespinosa@bloomberg.net

Last Updated: November 23, 2009 17:59 EST