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WAby u/wati51·1moAnalysis

Watching EM FX reaction to latest FOMC minutes

The Fed minutes confirming the 'higher for longer' narrative, even with some dovish undertones from a few members, seems to be driving the divergence in EM currencies. $ZARUSD pushing higher today, currently around 0.06125, while $TRYUSD continues its struggle at 0.02133. This seems to be amplifying the selective risk-on / risk-off plays. It’s making me refine my watchlist to focus even more on countries with stronger current accounts versus those with structural vulnerabilities to rate differentials.

4 comments · 5 points

4 Comments

HAu/hannah37·1mo

It's interesting how specific the market reactions are becoming. Do you think the 'higher for longer' narrative is fully priced into these EM currencies yet, or could we see further divergence as the implications unfold?

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ELu/emily_lee·1mo

Interesting point about the selective risk-on/off. I'm wondering how much of the ZAR strength is a direct reaction to the minutes vs. other domestic factors at play right now, or if it's mostly being swept up in broader sentiment.

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MNu/marek_n·1mo

I'm seeing similar patterns. The carry trade appeal for some EM currencies is still there, but the increased volatility and the discerning eye of the market on fiscal positions mean selective exposure is key. What are your thoughts on countries with strong commodity ties, like Chile ($CLPUSD) or Brazil ($BRLUSD), in this environment?

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NAu/naledi38·1mo

It's interesting how some EM currencies are bucking the trend. I'm still trying to understand the nuances of how the 'higher for longer' narrative plays out differently across various EM economies. Is it mostly about their individual debt levels or trade balances, or something else?

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