The US labour market delivered a softer-than-anticipated June payrolls report on Thursday, triggering a retreat in the dollar index from 101.4 to 100.7 and offering a broad lift to emerging-market assets. With US markets closed on Friday for the Independence Day holiday, trading volumes were thin, but the data was enough to snap the Indian rupee’s losing streak, push Brazil’s real back below R$5.17 per dollar, and keep the Mexican peso steady at 17.47. The Ibovespa equity index in São Paulo climbed 0.74% to 174,070 points, its highest close in a month, while Mumbai’s Sensex drew net foreign portfolio inflows of ₹1,355 crore.

The mechanism was straightforward: tepid jobs growth lengthened the odds on a near-term rate increase by the Federal Reserve, diminishing the dollar’s yield advantage and prompting a rotation into riskier assets. In Brazil, the move was amplified by domestic data showing industrial production contracted 0.2% in May, which reinforced bets that the central bank’s Copom will deliver a 0.25 percentage point Selic rate cut at its August meeting. Analysts in São Paulo, however, caution that the rally may be fragile. “The main engine—foreign capital—has been pulling back across all assets,” noted one strategist, pointing to fiscal uncertainty, the upcoming election, and a Selic rate that markets price above 11% until mid-2028.

The relief was not uniform. Indonesia’s Jakarta Composite Index slipped 0.35% over the week to 5,875, with average daily transaction value plunging 36% to Rp11.27 trillion, reflecting a broader caution across Southeast Asian markets. In Mexico City, the benchmark IPC index edged down 0.02%, as investors weighed the confirmation that the Trump administration will not extend the USMCA trade pact for 16 years, opening a 10-year liquidation window. Consumer confidence in Mexico rose slightly in June but remains in an 18-month contraction streak, tempering enthusiasm.

The next factual milestones are the release of US inflation indicators in the coming days, which will refine expectations for the Fed’s path, and the Copom’s August policy decision. For Mexico, the formal start of USMCA renegotiation talks will set the tone for trade-exposed sectors. Until then, emerging markets are likely to trade in a narrow range, caught between a softer dollar and unresolved domestic vulnerabilities.