EMCurrencies at near Record Highs ahead of Key U.S. Payroll Data

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May 7 Reuters Most emerging market currencies held steady on Friday ahead of a key U.S. jobs report, while robust Chinese trade data, strong commodity prices and a tepid dollar supported currencies through the week and pushed stocks to their oneweek high.

MSCIs index of emerging market currencies gained 0.3 to a 11week high and is 0.4 away from scaling an alltime peak. It is also on track for a fifth consecutive week of gains.

China extended its impressive trade performance in April as exports unexpectedly increased and import growth hit a decade high, while estimates the U.S. added nearly a million jobs in April helped support risk sentiment.

Strong U.S. growth and rising headline inflation are already showing in the data and this sets up markets for a decision point and a source of EM volatility as we head through Q2 into Q3, said Luis Oganes at JPMorgan in a note to clients.

If talk of normalizing policy starts in June then this can dominate EM price action given the forecast of US data strength into Q3.

The U.S. payrolls could boost risk appetite and weigh on the safe haven dollar, but inflation worries and expectations of a reduction in Federal Reserves stimulus could boost U.S. bond yields and the dollar.

MSCIs index of emerging market stocks gained 0.3 to its oneweek high but were set to drop for the second consecutive week led by a spike in coronavirus infections, inflationary pressures and fiscal uncertainty.

However, huge COVID19 outbreaks in India,…

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