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Investment insight: inside the EM currency comeback

Citywire’s Frank Talbot, head of US investment research, has crunched the numbers and get under the skin of a slowly emerging resurgence in the once catastrophic world of local currency.

Just looking at a basket of currencies are we finally seeing the rot stop in EM currencies vs the dollar? While the rest of the developed world is flagging against the dollar EM currencies, which are in general supported by resources, are on the up. (Data to July 25)

 

Emerging market debt had experienced a strong decade before this recent downward trajectory and had moved towards becoming more accepted mainstream assets. With positivity returning to the asset class, perhaps we could be approaching a return to form.

This resurgence comes at a time when lots of money has been heading towards EM debt in general and commodities have stabilised. The local currency market is looking pretty strong with this currency kicker.

Over the long term it’s not a pretty picture still but we are starting to see some similarities with 2012, which was the last time EM currencies as a whole were performing this well against the US dollar.

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