The MSCI EM Currency Index, which tracks the performance of 25 exchange rates against the dollar, is up 2% and has closed higher every day since Dec. 26. On Wednesday, the index was little changed and closed slightly higher. The advance has been led by the Chilean peso and Asian currencies including the Thai baht, the Chinese yuan and the Korean won.
The speed of the rise has led some strategists to question whether the rally is about to peter out. Geoffrey Yu, senior EMEA markets strategist at Bank of New York Mellon, said he remains skeptical of any belief that the Federal Reserve will change course on interest rates.
“A lot has happened very quickly and the markets may need a breather,” Yu said.
Other analysts say technical indicators point to continued market strength. The MSCI index has recovered 61.8% of the losses from its trough, marking a Fibonacci retracement pattern that some believe is a sign that the market is breaching resistance levels.