By Ankika Biswas

Sept 20 (Reuters) -Emerging market stocks and currencies were set for their biggest advance in around five weeks, buoyed by enthusiasm around a wider-than-usual interest rate cut by the U.S. Federal Reserve that prompted an investor rush towards risk assets.

The MSCI index for EM stocks .MSCIEF rose 0.7% to touch a near one-month high during the day, set for its steepest weekly gain since Aug. 12.

The currencies index .MIEM00000CUS hit a record high before turning flat, but was still poised for an eighth straight weekly gain and its best weekly performance since Aug. 19.

Boosting risk appetite globally, the U.S. central bank kicked off an anticipated series of rate cuts with a half-percentage-point reduction on Wednesday, with policymakers projecting another 50-basis-point cut by year-end.

"An aggressive start to the Fed-cutting cycle has raised the likelihood of a soft landing in the mind of the market. While Citi economics disagrees, for now markets are unlikely to fight the Fed," Citi analysts noted.

"We remain long the European periphery and replace our UK duration with an EM duration overweight. This leaves us long the high yielding EMFX as our key FX position."

As for equities, China stocks traded subdued after benchmark lending rates were unexpectedly kept unchanged, but the main indexes .CSI300, .SSEC logged weekly gains as the U.S. rate cut strengthened bets that Beijing will soon unveil fresh stimulus.

Meanwhile, China's yuan CNY=CFXS touched a 16-month high.

On the flip side, benchmark share indexes in Pakistan .KSE and India .NSEI, .BSESN hit record highs on the day.

The South African rand ZAR=D3 weakened against the greenback after a seven-day winning streak that came on the back of interest rate cuts by the Fed and the South African Reserve Bank, plus a local inflation print.

Sri Lanka's sovereign dollar bonds slipped more than 1 cent, on their last day of trading before the country's tightly fought presidential election.

The week was also marked by a slew of EM central bank policy decisions, with Brazil raising its benchmark interest rate by 25 basis points, diverging from the U.S. and other Latin American countries.

The day also saw the Bank of Japan keep interest rates steady and signal its confidence a solid economic recovery would allow for higher interest rates in coming months.

HIGHLIGHTS:

** Egypt PM says Saudi's planned $5 bln investment independent of cenbank deposit

** Philippine central bank cuts banks' reserve requirement ratios from Oct 25

** Thai cbank chief says no need for rate cut now as government pushes for easing

Reporting by Ankika Biswas in Bengaluru; Editing by Sherry Jacob-Phillips

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