That is the statement I heard from a wise man said to me today. So simple, yet the torrent of sentimental rain upon emerging markets for the last few weeks has seemed as if casual observers are throwing in the towel.
The Emerging Money EM FX Basket (EMFXB) is a GDP weighted index comprised of the eight most volatile primary currencies in EM.
DXY index is off -85bps in afternoon trading, but that doesn’t mean the USD strength devastation is not being felt across the world.
LONG the US Dollar was a trade that for much of 2013 was a consensus view, but to many this trade failed despite the backdrop of a stronger US economy and the Fed in the wings to taper.
The charts tell you what you need to know about asset flows, quantitative easing (QE), and the impact on emerging markets.
The South African ZAR breaks to 4yr lows as banking sector under pressure and threat of rate cuts comes as inflation plummets for this commodity dependent economy.
We’ve seen amazing turns in emerging market currencies over the last few sessions with gap-type moves in ZAR, BRL, PLN, and RUB, even as the dollar holds its ground.
The South African rand is now at 45-month lows with a hard sharp move in ZAR in the last hour, which is now -1.25%. Local bonds are being sold off hard.
Like many emerging markets, South Africa is struggling to find an equilibrium between taming inflation and bolstering growth. After the latest inflation numbers came in at 6.3%, higher than the central bank’s target range, pundits have started to question the appropriateness of the Reserve Bank’s price stability mandate with some calling for a constitutional amendment to scrap said mandate.
Since climbing off their post-recession low on Tuesday, stocks in the emerging world are coming back strong. The question is whether this is an organic rally or an artificial effect of central bank action.