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- Strong global recovery to support risk appetite for EM currencies – HSBC
Strong global recovery to support risk appetite for EM currencies – HSBC
FXStreet reports that in the view of economists at HSBC, despite the volatility, supportive foundations for most EM FX are expected to be in place in 2021.
“Many FX market participants remembered the damage to emerging markets (EM) FX caused by the ‘taper tantrum’ in 2013, and are wondering if something similar is about to happen today. Notwithstanding the comparable repricing of US yields, we believe EM FX has been relatively steadier this time around for good reasons – current account balances are healthier, portfolio outflows from EM are slower and valuations are low.”
“Our base case is that the strong recoveries in the US and elsewhere will eventually have positive spill-over effects to EM growth. Loose monetary policies in developed markets (DM) and vaccination progress globally would support risk appetite for EM assets. So we have pencilled in modest EM FX appreciation by year-end 2021.”
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