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EM FX performance affected by USD strength - TD Securities

FXStreet (Łódź) - The TD Securities team of experts believe that the recent bad performance of EM currencies is linked to USD strength rather than to the currencies' weakness.

Key quotes

"The worst performing EM currency in the past three months has been the RUB, driven by political risks."
"However, EUR/USD weakness has meant that many EM FX have actually appreciated to the euro."

"There appears no obvious correlation between FX performance and the external vulnerabilities of the country. This is in contrast to the ‘Taper Tantrum’ of last year when external vulnerabilities seemed to be the main driver of performance."

"It is USD strength rather than EM FX weakness that is driving the moves now."

"We continue to favour Asian and select Latam FX., especially INR and MXN. EMEA is likely to underperform the most to the dollar, but we expect PLN and TRY to outperform the EUR. The BRL presents investors with a binary outcome related to elections."

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