An index for emerging-market currencies rose for a 10th successive week, its longest winning streak since 2007, even as a blowout US jobs report briefly jolted global markets on Friday. MSCI's gauge for developing nation currencies gained 0.3% Friday, bringing its weekly advance to 0.6%.
The EM currency index briefly trimmed gains after strong US jobs growth fueled bets for a Federal Reserve rate hike and sent the dollar higher. Currencies like South Africa's rand and Mexico's peso then rebounded after weakening in the wake of the US jobs report.
Investors will now turn to next week's US inflation data for fresh clues on the Fed's upcoming rate decision. Friday's release may strengthen the case for a September hike, but the consumer price index is likely to remain the decisive input for policymakers.
The jobs data “confirms that CPI is the relevant data point,” said Marco Oviedo, strategist at XP Investimentos. “If CPI comes in as expected, with lower annual core inflation, I believe a Fed pause could be guaranteed. Until then, I don't expect any major moves.”
On Thursday, Fed Governor Christopher Waller said he'd support holding the policy rate if there was continued progress on inflation control. Fed's John Williams said this week there's evidence inflation continues to ease as the impact of tariffs fades while higher energy prices are not spreading to other services.
“A soft inflation print may provide some brief relief for the EM assets, but overall the pressure for the Fed hike will remain elevated given the lingering inflation challenges,” said Dan Pan, an economist at Standard Chartered Bank.
EM Currencies Have Best Run Since 2007
Photo Credit: (Photo: Bloomberg)
Gauges for developing world assets rallied this week as a surge in bond yields across advanced nations fueled diversification flows. A jump in the yen amid speculation of intervention and the next steps for the Bank of Japan also sent the dollar lower this week, boosting emerging currencies.
Emerging-market stocks swung to a weekly gain as the MSCI benchmark rose 1.3% on Friday, driven by artificial-intelligence stocks.
In credit, El Salvador's bonds rallied as the nation and the International Monetary Fund reached a staff-level agreement on extended fund facility reviews.
Meantime, S&P Global Ratings cut Senegal's credit score further into junk territory, saying a distressed debt exchange or default on the country's foreign-currency commercial debt is “extremely likely” after the government launched a plan to restructure its obligations.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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