Emerging Markets: It’s a break in, not a reversal of bull momentum – TDS

By FXStreet Cristian Maggio, Head of Emerging Markets Strategy at TD Securities, suggests that since the start of the week, EM currencies have felt some negative pressure as the dollar gained strength.

Key Quotes

“Major DM currencies have posted comparable moves, but opposite in direction, with the EUR giving up 1.5% and the JPY 1.7% against the dollar in the same timeframe.

This adverse momentum has caused the ZAR to give up 4.5%, TRY to drop 4.3% (until the rebound earlier yesterday), and MXN, BRL and COP to retrace 2.9-3.5% in a little less than a week. In fact, it is hard to find any EM FX that has gained against the greenback since the start of the month.

Is this a worrying signal?

Perhaps, but first off, one should recognize that the vast majority of EM currencies, and the high yielding ones in particular, still are top year-to-date performers vs USD. The RUB and BRL have gained nearly 12%; COP and MYR are up by over 7%; CEE FX bar PLN, CLP and a few Asians, including SGD and IDR, have gained no less than 4%.

Even the underperformers have often appreciated to the dollar this year. PEN, PLN, TWD and KRW have done worse than …read more

Source:: FX Street