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Emerging market reaction to nonfarm payrolls

Friday's weak U.S. jobs numbers failed to calm concerns about emerging market currencies, with analysts warning the data was not enough to overcome ongoing volatility.

U.S. nonfarm payrolls totaled 113,000 in January — significantly below the 185,000 expected by economists – dashing hopes of a steady economic recovery. However, the figures were enough to help lower the unemployment rate from 6.7 percent to 6.6 percent.

Mustafa Ozer | AFP | Getty Images

At first emerging markets seemed to cheer the news – with currencies including the South African rand, Mexican Peso and Turkey's lira strengthening against the dollar. Shortly afterwards, however, some of the gains were reversed.

(Read more: Not only weather to blame for 'weird' jobs report)

The jobs data should temper any expectations that the U.S. Federal Reserve will accelerate the pace at which it winds down its monetary stimulus, according to Benoit Anne, head of global emerging market strategy at Societe Generale. The American central bank is in the process of tapering off its quantitative easing program.

Since 2009, the Fed's bond-buying program helped boost risk sentiment and flooded the financial markets with extra funds – all of which increased appetite in emerging market currencies. Any accelerated "tapering" by the Fed will dissuade investors from sticking with their foreign currency holdings.

"There is no doubt the nonfarm payrolls is something of a relief for emerging markets," Anne told CNBC. "But despite this I am not getting overly excited."

(Read more: How fragile are emerging markets?)


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