The MSCI index for developing-nation currencies climbed 0.25%, hitting a session high, with South Africa’s rand, Hungary’s forint and Mexico’s peso leading the gains. Meanwhile, a gauge of dollar strength slid some 0.5%. A companion index for EM stocks also rose, led higher by shares of Korean companies. The so-called core consumer price index, which excludes food and energy costs, increased 0.2% in December, according to Bureau of Labor Statistics figures released Wednesday, compared with the 0.3% medium forecast of analysts. From a year ago, it rose 3.2%.
Concerns over lingering price pressures had fueled bets of a more hawkish Fed in recent weeks, strengthening the greenback and roiling emerging-market assets. While the easing in core CPI is welcome after months of elevated readings, investors say it may not be enough to convince Fed officials that inflation will maintain its downward trend.
Today’s data “revives risk-appetite in the midst of ongoing uncertainty over the potential for tariffs and other inflationary pressures coming down the line,” said Juan Perez, director of trading with Monex USA in Washington. “It leaves a possibility that the Fed may still act loosely at some point this year, instead of eliminating that chance.”
Elsewhere in currency markets, Indonesia’s rupiah was the worst performer, after the country’s central bank defied market expectations and cut its key interest rate by a quarter point to 5.75%, in a bid to bolster economic growth.
