Emerging-market currencies are having a rare good day, but the longer-term outlook remains challenging.

An index of major EM currencies has risen almost 0.2% today amid broad dollar weakness following Donald Trump’s choice of Scott Bessent as Treasury Secretary. Bessent, a fiscal hawk, is seen as a steady hand who will keep fiscal deficits under control, leading to lower Treasury yields and a weaker greenback.

But it is only the sixth up-day this month and the EM currency index is still down 2.5% this quarter, on track for its worst quarterly performance in more than two years. Much of that decline came after Trump’s victory in the US presidential election, as traders bet his promised tariffs will hurt developing economies while stoking US inflation, leading to higher interest rates.

That narrative is still very much alive, as options positioning illustrates. While one-month implied volatility for EM currencies has fallen sharply, the one-year measure remains elevated at the highest level since Oct. 2022. That suggests the road ahead remains rocky.