Calmer conditions can see renewed interest in emerging markets – ING

A very quiet Monday and what looks the same again today has seen the dollar soften slightly across the board. Dollar stability can allow some interest in high yield  emerging markets (EM) FX, economists at ING report.

Window of carry sees renewed interest in EMFX

“Even though we think the dollar can stay quite well bid for the rest of the year as the Fed takes the funds rate to 3.25/3.50%, dollar stability at the highs could see renewed interest in this high-yield EM local currency bond space.” 

“Quiet summer markets could see investors starting to position at the long end of the EM local currency bond market for EM easing cycles coming through next year. 

“Back to DXY, expect another range-bound day as the market awaits the US July CPI release tomorrow – a release expected to cement expectations that the Fed Funds rate will be taken to the 3.25/3.50% area by year-end.”