JOHANNESBURG/BENGALURU : Most emerging market currencies will continue to struggle against the mighty dollar over the coming year as the U.S. Federal Reserve finally delivers expected aggressive policy tightening, according to a Reuters poll of FX strategists.
The latest Reuters poll of over 50 currency strategists showed nearly all developing market currencies would weaken over the coming 12 months. "A particular risk to EMFX is that as the Fed starts to deliver rate hikes, further upside in U.S. yields could be primarily driven more by real yields than breakeven inflation"While most emerging market currencies have managed to escape the onslaught of the Fed's policy tightening relatively unscathed, the Russian rouble and the Turkish lira were notable exceptions.
" is not the true reflection of the fundamental situation in Russia. The economy is expected to contract very sharply and inflation is going to become more elevated, which over the longer term should be more consistent with a weaker rouble," said Lee Hardman, currency analyst at MUFG."They are intervening to support the lira but they're not going down the kind of draconian measures like capital controls we see in Russia.