EM currency correlations and the 'flight to safety' dynamic
asked by u/fx_quant_lee · 1d · 0 answers
I've been observing some of the EM currencies, like the TRY and ZAR, and I'm trying to get a better handle on their correlation with broader market sentiment, especially during risk-off events. It feels like they sometimes move in lockstep with the DXY's strength, almost disproportionately to their fundamental news. Is there a generally accepted heuristic or framework for how much of this 'flight to safety' is purely correlation play vs. actual, local economic indicators, especially when considering the carry trade unwind? How do you seasoned folks typically weigh these two drivers when assessing a currency's potential movement in a volatile period?