NEW YORK - Investors are grappling with conflicting signals on emerging market currencies as they weigh easing by the Federal Reserve and other major central banks against the economic damage already wrought by the coronavirus outbreak.
Emerging market bulls typically welcome lower rates in the developed world as they boost the attractiveness of developing countries’ assets and help fuel the carry trade, a strategy in which investors borrow in low-yielding currencies to invest in higher-yielding ones. Returns on carry trade strategies, meanwhile, are down 2% since January 31 after notching a 6.1% gain in 2019, according to an index from Credit Suisse measuring returns on 15 emerging market currencies. Few may be willing to jump back into the strategy if uncertainty over the coronavirus continues to shadow global growth.
Some of the declines in emerging market currencies have been dramatic, rivaling recent drops in the S&P 500 and other stock markets. The Brazilian real - the world’s worst-performing traded currency year-to-date - has fallen more than 13% this year, with the Chilean peso and South African rand not far behind. All three nations, like many other emerging market economies, count China as one of the top destinations for their commodity exports.
Ya think? I wonder why? Can anyone help me with this one because it seems pretty common sense to me
Camel Exchange? What? Oh wait. No. That's not it.
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