Emerging-Market Currencies Hit Session Highs on US Jobs Miss
Emerging-market currency indices rose to their highest levels of the trading session on Friday, as a disappointing US employment report led investors to retreat from positions pricing in yet another Federal Reserve interest-rate increase within the current month.
The Bureau of Labor Statistics reported that nonfarm payrolls grew by just 29,000 in September, a figure that fell short of every projection gathered in a Bloomberg survey of economists. The release also included downward revisions to the employment numbers for the two preceding months, underscoring broader softness in the US labour market.
A Cooler Payrolls Print Resets Rate Expectations
The weaker-than-expected jobs data shifted the tone of the conversation around the Federal Reserve's policy path. With the labour market showing more signs of cooling, traders began to reduce their bets on the central bank delivering a further rate hike within the current month.
For emerging markets, this repricing proved to be a welcome relief. When the prospect of tighter US monetary policy recedes, capital flows tend to tilt away from US dollar assets and toward higher-yielding currencies in developing economies, providing a short-term cushion to EM currency valuations.
Expert Perspective from TCW
Bloomberg Markets spoke with Anisha Goodly, Managing Director of Fixed Income at TCW, to discuss how the September employment figures might influence the broader fixed-income landscape and what the data implies for positioning across emerging-market debt and currency markets.
The combination of a sub-forecast payrolls print and the accompanying downward revisions has given EM asset managers a brief window of optimism, though many remain cautious about how long the relief will last should subsequent US data rekindle rate-hike concerns.
