A gauge of developing nation currencies halved its weekly gains Friday as a hawkish tweak to Japanese central bank policy threatened to derail this year’s most lucrative emerging-markets strategy.

MSCI’s EM currency index dropped as much as 0.4%, the most in four months on a closing basis, with Asian currencies leading the declines. The gauge had been on track for a 0.4% advance by Thursday’s close, but had whittled that down to 0.2% as of 11:23 a.m. in London.

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