DXY index is off -85bps in afternoon trading, but that doesn’t mean the USD strength devastation is not being felt across the world.
Because of the weighting of DXY Index, a move higher by the Euro against the Dollar masks Dollar strength in other places.
I tweeted out this morning that despite '13 being the year of the weaker EM FX, 2014 is starting even worse.
The Dollar is dominating EM FX as asset flows continue to pull out of more volatile politics and macro uncertainty. Turkey, Argentina, and South Africa are the extreme players today in a rout that may have started with slower China manufacturing data.
In Argentina, the Peso plunged 13.4% after a -1.4% move yesterday as it looks like the CB is finally letting the currency go. This is not over as far as I am concerned and we expect yields to spike higher. Simply, the CB cannot afford to support the currency.
EM equities are down 2.7% today on the MSCI. It's all FX related.