Fed hike behind us, what’s next for emerging markets currencies – Danske Bank

By FXStreet FXStreet (Delhi) – Research Team at Danske Bank, notes that after more than two year’s anxious wait, the Fed delivered its first rate hike and the big uncertainties are whether the Fed move means that emerging market currencies are finally out of the woods and whether we could see a stronger path in the new year.

Key Quotes

“Our immediate answer is maybe but go very selectively and be prepared for significant bumps along the way. There is no doubt that the first Fed hike has removed some of the uncertainty, which has left policymakers and investors in emerging markets struggling.

We need to keep in mind a point that Janet Yellen reminded us of at her press conference, i.e. that emerging markets usually benefit from strong US growth, which is the background for the higher interest in the US. Another point to keep in mind, which we have highlighted over the past couple of months, is that, unlike in other Fed tightening cycles, this time many emerging markets have more flexible exchange rate systems. This mean their exchange rates have taken the brunt of the adjustment over the past two years, helping to close large external imbalances and eventually overcome …read more

Source:: FX Street