Emerging Market Currencies Rise as Dollar Weakens Ahead of U.S. Inflation Data

Emerging market currencies saw an uptick on Friday as the U.S. dollar weakened ahead of crucial inflation data. The Federal Reserve's preferred inflation metric is expected to provide insights into potential interest rate cuts. Various currencies, including China's yuan and South Africa's rand, saw notable gains.

Emerging market currencies experienced an uptick on Friday, buoyed by a weakening U.S. dollar ahead of critical U.S. inflation data releases. This data, which includes the Federal Reserve's preferred inflation metric, is anticipated to provide insights into future interest rate cuts.

The personal consumption expenditures (PCE) index, due at 1230 GMT, is expected to show a 0.2% rise in July for both headline and core inflation. Market experts believe this could support expectations for 100 basis points of easing by the Fed by year-end. FX strategist at ING, Francesco Pesole, noted their consensus aligns with these projections.

In addition, emerging market currencies like China's yuan and South Africa's rand registered gains, while European currencies also showed positive trends. Investors are closely monitoring global economic indicators, especially after the Bank of Japan's surprise rate hike earlier this month added to market volatility.

(With inputs from agencies.)