Emerging-market assets are enjoying one of their better days since Russia’s Feb. 24 invasion of Ukraine. But market participants warned that a long list of risks could turn the nascent rally into a false dawn.

An index of developing-country currencies headed for its biggest one-day advance in more than seven months as it rose for a second consecutive day -- a feat not accomplished since the war started.

And while Russia’s ruble tumbled more than 15%, peers that have been the hardest hit because of their proximity to the fighting, including the forint and the zloty, climbed.

Even so, the narrative for emerging-markets may not actually have changed.

“While today’s price action in the EM space is encouraging, we believe markets are set to endure more volatility given the ambiguity of how the conflict will end,” said Ehsan Khoman, head of emerging market research for Europe, Middle East and Africa at MUFG Bank in Dubai. 

“A real bullish pivot would need more conviction that the geopolitical risk premia are markedly ebbing through a promising peace agreement,” Khoman said.

The mood has temporarily brightened after Moscow announced a pause in fighting Wednesday to open humanitarian corridors from cities including Kyiv.

Signs of the reprieve could be seen in other asset classes. An index of developing-nation stocks headed for the biggest one-day gain in nearly two weeks. South Africa’s rand, often a proxy for emerging-market sentiment, gained a third day, the best streak in three weeks. 

In a bullish sign, the rand strengthened through the bottom end of a range it has kept against the dollar since Feb. 24. Investors also reduced bearish bets on emerging-asset currencies for the first day in four, and by the most since the conflict began.

Hungary’s forint gained as much as 2.4% against the euro and more than 3% to the dollar. Poland’s zloty climbed 1.8% against the common currency and 2.5% relative to the greenback. Both received boosts from central bank action and news that Ukraine is ready to discuss neutrality.

Moves in these currencies reflected “some temporary strength on peace hopes, rate hikes and intervention -- but a lasting recovery doesn’t come through until things are clearer to the East,” said Chris Turner, the London-based head of foreign-exchange strategy at ING Bank NV. “I’m still a little concerned that the buy side will want to sell liquid central and eastern Europe assets, since their Russian assets have been frozen.” 

For the moment, it’s just the ruble under pressure.

“It has not had time to adjust fully to the new reality following the imposition of sanctions on Russia,” said Per Hammarlund, chief emerging-markets strategist at SEB AB in Stockholm.

“Given that I assume that the war will drag on and become increasingly bloody and destructive, additional sanctions are likely over the coming few months,” he said. “The EU and Germany, in particular, will come under increasing pressure to cut imports of Russian energy. If or when the EU decides to cut imports or if Russia decides to restricts exports to the EU in retaliation, we would see renewed weakness in EM FX.” 

--With assistance from Maciej Onoszko.

This article was provided by Bloomberg News.