Emerging-market stocks rally as soft U.S. jobs data weakens dollar

Emerging-market equities rallied on Friday as a weaker-than-expected U.S. jobs report pulled the dollar toward its steepest weekly decline since April, easing pressure on developing-world assets that had been battered by Federal Reserve rate-hike fears.

Jobs Miss Fuels Risk Rally

MSCI's emerging-market equity index rose about 2.2% on July 3, rebounding from losses earlier in the week, after data released Thursday showed the U.S. economy added just 57,000 jobs in June — roughly half the 110,000 consensus forecast. The Bureau of Labor Statistics also revised May payrolls sharply lower, to 129,000 from a previously reported 172,000.youtube+2

The cooler labor market reading prompted traders to scale back bets on near-term Fed tightening. According to CME FedWatch data, markets now price in a 52% probability of a rate hike at the September meeting, down from 64% before the report. The repricing lifted growth-sensitive assets across Asia and other emerging markets on Friday.cnbc+1

Dollar Slides, EM Currencies Gain

The dollar index fell 0.2% in Asian trading Friday to 100.77, extending Thursday's 0.5% drop. For the week, the index declined 0.58%, its largest weekly fall since early April. The weakening greenback provided relief for emerging-market currencies, which had erased their 2026 gains earlier in the week amid hawkish Fed speculation.businesstoday+3

The Japanese yen traded near 161 per dollar after rallying nearly 1% on Thursday, pulling back from 40-year lows. The euro held above $1.14.reuters+1

South Korea in Focus

South Korea's Kospi, which had plunged more than 8% in early June on rate-hike fears and suffered a further 10% drop on June 23 amid a leveraged-ETF scare, benefited from renewed tech-sector interest as borrowing-cost concerns eased. The index has been volatile in 2026 despite posting large year-to-date gains, with foreign investors having sold $78 billion of South Korean equities through mid-June.money.usnews+2

Federal Reserve Chair Kevin Warsh said Wednesday that war-related inflation risks have diminished, though he reiterated the central bank's 2% average inflation target. Traders now see the earliest likely hike pushed to the fourth quarter, leaving room for emerging-market assets to recover further if U.S. data continues to soften.kitco