Strong non-farm payroll data failed to halt the rally: emerging market currencies rose for the 10th consecutive week, marking the longest winning streak since 2007.

Emerging market currencies continued their strong performance, with even robust US jobs data briefly stirring global markets but failing to halt the rally. Market attention has now turned to next week's US inflation data, the outcome of which will have a decisive impact on the Federal Reserve's next policy move.

The MSCI Emerging Markets Currency Index rose 0.4% on Friday and is on track for a 0.7% gain for the week, marking its 10th consecutive week of gains—the longest winning streak since 2007.

Following the release of the US non-farm payrolls report, the strong data briefly boosted the US dollar and suppressed emerging market currencies, but currencies such as the South African rand and Mexican peso quickly recovered their losses.

The strong employment data has further strengthened expectations of a Fed rate hike in September, but the market generally believes that the upcoming Consumer Price Index (CPI) will be the key variable for policy direction.

XP Investimentos strategist Marco Oviedo stated that the employment data "confirms that the CPI is the truly key data point," and that "if the CPI meets expectations and the core inflation rate declines, it's almost certain that the Fed will pause rate hikes."

The driving force behind the continuous rise: the appreciation of the yen and the diversion of funds due to bond market volatility.

The overall rise in emerging market assets this week benefited from the convergence of multiple factors.

Developed country bond yields surged, prompting funds to seek diversified allocations; meanwhile, the yen appreciated rapidly due to market speculation about the Bank of Japan's intervention and policy direction, weakening the dollar and further supporting emerging market currencies.

In the stock market, the MSCI Emerging Markets Equity Benchmark Index rose 1.5% on Friday, with the artificial intelligence sector performing particularly well, driving the overall index to reverse its previous downward trend and turn a weekly gain.

Federal Reserve officials signal that inflation is becoming the dominant factor in expectations.

Several Federal Reserve officials made statements this week, providing policy reference points for the market.

Federal Reserve Governor Christopher Waller stated that he would support maintaining the current policy rate if inflation continues to be controlled. New York Fed President John Williams pointed out that there is evidence that inflation is continuing to decline as the effects of tariffs subside, and that rising energy prices have not yet spread to other service sectors.

Standard Chartered economist Dan Pan takes a cautious stance. He stated, "If inflation data is weak, emerging market assets may receive a brief respite, but given that inflationary pressures remain deeply entrenched, market expectations for a Fed rate hike will generally remain high."

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