Emerging Markets
FX
BE CAREFUL IN CATCHING THE
EMERGING MARKETS FALLING KNIFE or at least be selective in your picks
“Te pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.” (William Arthur Ward)
It is barely ten weeks since we got worried about a new wall of money heading to emerging markets on the back of quantitative easing by the Bank of Japan and lingering doubts about the strength of US recovery. Tis sentiment has entirely reversed in recent weeks, in particular since
markets have begun to price in the end of Fed asset purchases.
It’s a bit ironic that the large emerging markets countries, which complained about monetary easing in the US (Brazilian Finance Minister Guido Mantega called it ‘currency war’),
are now the hardest hit when talks about tapering QE are hitting the headlines. Be careful what you hope for. Brazil just had a massive weakening of its currency and the central bank had to hike rates to defend the currency. Not good for their
already struggling growth… FX TRADER MAGAZINE July - September 2013 9
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