SAO PAULO/LONDON: Emerging market currencies pared gains on Friday as traders reconsidered the impact of January's U.S. payroll numbers on the Federal Reserve's plans to reduce its monetary stimulus program.
U.S. employers hired far fewer workers than expected in January and job gains for the prior month were barely revised up, data showed on Friday.
Traders initially saw the data as evidence that growth in the world's largest economy is losing steam, driving emerging market currencies higher on a bet that the Fed would be less likely to further trim its bond-buying program.
But a closer look at the figures led many to shift course.
"After we looked deeper into the numbers we found the positive details overshadowed the negative headline," said Michael Woolfolk, a senior currency strategist at BNY Mellon in New York, citing data showing strong employment gains in the household survey from which the jobless rate is derived.
"If the US economy has indeed slowed this winter, it is first of all modest," he said.
Brazil's real closed nearly unchanged from Thursday after having reached its strongest level in over two weeks earlier in the session. The Mexican and Chilean pesos were also unable to hold onto gains.
The Turkish lira reversed gains against the dollar late in the session. Standard & Poor's downgraded Turkey's credit rating outlook to "negative" from "stable" on Friday, citing risks of a hard economic landing.
Both Turkey's lira and Ukraine's hryvnia had fallen sharply in recent weeks as investors fretted over the impact of political crises in their respective countries.
Ukraine, which is struggling to prop up its currency amid sometimes violent street confrontations over the nation's future, saw its long-term foreign currency Issuer Default Rating (IDR) downgraded by Fitch Ratings to 'CCC' from 'B- on Friday afternoon.
The hryvnia traded 3.28 percent stronger, however, after the central bank on Thursday slapped restrictions on some types of foreign currency purchases, saying the move was aimed at defending the banking system's stability.
In Russia, the rouble capped a three-day rally against the dollar. On Friday Russia's central bank again shifted its target exchange-rate corridor following interventions aimed at curbing the pace of the currency's decline.
Meanwhile, emerging equities remained at their highest level in over a week. Brazil's Bovespa index closed 0.7 percent higher, posting its first weekly gain in six weeks.
Mexico's IPC stock index held onto gains after inflation data beat expectations, while Chile's IPSA index rallied for a fourth day.
Chile's index was boosted by a 3.3 percent gain in shares of electricity generator Endesa Chile afer the company posted a big jump in 2013 net profit.
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