JOHANNESBURG/BENGALURU : The shift in global inflation expectations from transitory to sticky will spare emerging market currencies a sell-off in the next few months as central banks consider or deliver near-term interest rate hikes, a Reuters poll of strategists found.
"The persistency of EM inflation is forcing a reaction from central banks, and while nominal carry for EMFX is rising, real interest rates are struggling to enter positive territory," noted Jonny Goulden, emerging market strategist at JPMorgan. "EM macro fundamentals are generally healthier - especially the ex-ante real rate buffer that has been rebuilt on a broad basis following the rate hikes across EM in the last six months," wrote Ian Tomb, emerging markets economist at Goldman Sachs, in a client note.
China's yuan was one of few currencies that finished subsequent quarters strongly after that episode. Other emerging market currencies ended the following quarterly periods weaker, with the rand suffering a nine-quarter losing streak.