Emerging-market currencies got a lift Thursday from weaker-than-expected U.S. jobs data. But emerging stocks took a beating, hitting a three-week low.
The U.S. added fewer jobs in June than economists had forecast. That lowered the odds that the Federal Reserve will raise interest rates soon. With less urgency to tighten, the dollar lost ground.
The Bloomberg Dollar Spot Index dropped 0.5%. That gave a boost to emerging-market currencies.
The South African rand gained about 1% against the dollar. Hungary's forint also rose roughly 1%.
"The payrolls report has reduced the odds of another Fed rate hike, which should take some steam out of the dollar rally, making this more than just a one-day move," said Greg Lesko, portfolio manager for emerging markets at Deltec Asset Management LLC.
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Alvaro Vivanco, who serves as a strategist for emerging markets at Wells Fargo Securities, echoed that view. He said, "This is a good print for emerging market currencies as it certainly takes out the urgency on the Fed."
The main culprit: a selloff in South Korean AI-related chip stocks.
Investors suddenly worried that the semiconductor industry is producing too many chips - a capacity glut. That fear sparked a wave of profit-taking. South Korea's Kospi index slumped 7.9%.
Taiwan Semiconductor Manufacturing Corp. fell 1.6%. The damage also spread to Chinese stocks. Yangtze Optical Fibre & Cable plunged 22%. Skyverse Technology Co Ltd dropped 16%.
The selloff is especially painful because the Kospi had rallied almost 70% in the April-to-June period of 2026.
"The immediate risk is that the most crowded winners of Q2 - memory, semis, Asian AI supply chain - become a source of profit-taking," said Florian Ielpo, manager at Lombard Odier Investment Managers. "This is not a broad Asian risk-off move, it is mostly an AI-supply-chain de-risking after a very strong quarter."
Some investors warn that Asian tech stocks could fall further. The most popular bets in the second quarter - memory chips, semiconductors, and the Asian AI supply chain - are now at risk of more selling. As the dollar's influence fades, local political and fiscal factors will become more important for emerging-market currencies.
Senegal is negotiating with the International Monetary Fund, and Congo is planning its first stock exchange. Argentine power producer Genneia SA just filed for an IPO in New York.
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