EM currencies: hedge your bets | beyondbrics

EM currencies: hedge your bets | beyondbrics:

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Emerging market currencies that were the hardest hit by the summer’s sell-off rallied on Monday after Lawrence Summers pulled out of the race for the Federal Reserve, fuelling hopes that easy monetary policy in the US will continue for longer.

The South Africa rand climbed 1.3 per cent to R9.807; the Turkish lira gained 1.4 per cent to TL2.02600 and the Indian rupee – which hit a succession of record lows earlier in August – rose 1 per cent to Rs62.83, a near one-month high.

But set aside the current rally, take the long view and the news is that little has changed. Most EM currencies are expected to weaken against the dollar over the next year or so, as the US begins tightening its monetary and raise interest rates. So how should companies and investors respond to this shifting environment? Adapt and make the most of it, says Frontier Strategy Group (FSG), a consultancy."

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