September 7, a survey of foreign exchange market strategists and economists by US media showed that as the Federal Reserve continues to raise interest rates and the demand for safe-haven benefits continue to boost the US dollar, the market generally believes that emerging market currencies will find it difficult to recover their lost ground this year.
On Tuesday, the world market capital flowed further into the US dollar due to growing concerns about a global recession, which brought the broader EMFX emerging market currency index to its lowest point in two years.
And on July 6, the MSCI Emerging Markets Currency Index had fallen by 4.4%, about to break through the largest annual decline since 2015.
. For the trend of currencies in emerging market countries in the next three months, strategists and economists surveyed are expected to continue to weaken, or at best maintain a downward range. Phoenix Kalen, head of emerging market strategy at Societe Generale , pointed out: "The EMFX index will continue to experience a period of drastic fluctuations until the US dollar reaches its peak."
In the previous U.S. tightening cycle, the emerging market countries central banks usually tried to catch up or even surpass the pace of the Fed's interest rate hike in order to maintain the stability of the local currency exchange rate , but this time they did not keep up.
The most affected include Turkish lira , Philippine peso and Indian rupees.
On September 10, 2021, the opening price of the Turkish lira against the US dollar was 0.1199. As of press time, the exchange rate had fallen to 0.0543, a drop of more than 54%. The Philippine Peso has also fallen sharply against the US dollar this year, with an annual decline of about 13%. The Indian rupee fell by about 8.75% annually. Philippines and India both fell to years lows.
As the energy crisis further deepens and the risk of economic recession in Western countries increases, 11% of the experts surveyed believe that currencies in emerging market countries will still have the possibility of plummeting in the next three months.
Russian ruble and South African rand are among the few emerging market currencies that perform better, among which the Russian ruble is mainly supported by capital controls and energy exports. However, since the high exchange rate of ruble will be detrimental to Russia's foreign trade, it is expected that the ruble will depreciate artificially by about 15% next year, and the exchange rate against the US dollar will return to the level of 70-80.
Although the RMB has been hit by a strong US dollar this year and the exchange rate has fallen, with the implementation of various fiscal stimulus measures in my country and the improvement of the epidemic prevention and control trend, the median survey shows that the market expects the RMB exchange rate to strengthen.
text | Wei Lai title | Huang Zixin review | Chen Jiali
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