Emerging Market Currencies Hit Record Highs as Dollar Weakness Persists

Emerging market currencies climbed to new record levels on Friday, extending a multi-week rally as persistent weakness in the U.S. dollar continued to bolster risk-sensitive assets. The MSCI emerging markets currency index is on track for its eighth consecutive weekly gain.

Broad Rally Driven by Weaker Dollar

MSCI’s emerging markets currency index rose 0.3% on Friday, continuing a series of all-time highs reached this month, according to Investing.com data. The move reflects broad-based selling of the U.S. dollar, which was set for weekly losses amid investor concerns that rising U.S. debt and policy uncertainty could erode its purchasing power.

The dollar's decline has occurred even as U.S. Treasury yields have climbed again. This follows a Treasury intervention on Wednesday that provided only brief relief from selling pressure, and comments from U.S. Treasury Secretary Scott Bessent who noted the government could increase Treasury buybacks.

Asian Currencies Lead Gains

The risk-on sentiment fueled by the weaker dollar was evident across Asian markets, though equity performance was mixed. The South Korean won was a notable gainer, rising 0.9% to an 11-month high and on track for a weekly gain of more than 2%. Other key movements included:

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• The Taiwan dollar gained 0.7%.
• China’s yuan hovered near a 3.5-year peak.

In China, Vice Finance Minister Liao Min said the country will roll out additional fiscal measures to support its slowing economy. While the blue-chip CSI 300 index rose 0.6%, both South Korea’s KOSPI and Taiwanese shares were on track for weekly losses of nearly 1%.

Developments in Europe and Turkey

In emerging Europe, the Czech koruna rose 0.4% against the euro, while Poland’s zloty gained 0.2%. The Polish government is proposing to raise the corporate tax rate for large utilities and fuel companies to 30% in 2027, the state news agency PAP reported on Thursday.

The Turkish lira was a standout performer, strengthening 2.1% after a report showed business confidence among manufacturers increased to 102.8 points in August. A reading above 100 indicates optimism. Turkish stocks also gained 0.8%.