After paring back some losses after the slightly lower-than-expected US PPI data today, emerging assets are back under pressure due to the inflation numbers, which sent traders scrambling to rework the outlook for US interest rates on Wednesday. Rising geopolitical tension in the Middle East is also damping investor appetite for risk.

“Markets are still digesting CPI, but PPI suggested little relief ahead with regards to inflation,” said Win Thin, managing director and global head of markets strategy at Brown Brothers Harriman & Co. “I believe many EM central banks will have to recalibrate their easing cycles in light of the Fed outlook, lest their currencies come under withering pressure.”

Investors will be watching for signs of persistent inflation and strong growth in the US for clues on the Federal Reserve’s next steps, Thin said.

Bond Traders Shift Thinking to a 5% Yield, No Rate Cut World

Peru’s sol outperformed most of the other 22 emerging peers tracked by Bloomberg ahead of a central bank meeting in which policymakers are expected to keep borrowing costs unchanged for the second time. The decision will be announced after the local market closes.

Elsewhere, El Salvador is tapping the global debt market with an offering that will pay investors a higher interest rate if the government fails to win credit upgrades or a deal with the International Monetary Fund. It’s the first bond deal in nearly four years for the junk-rated borrower and follows a broad rally in El Salvador’s debt.