Whatever happened to the EM rout? | beyondbrics

Whatever happened to the EM rout? | beyondbrics:

"

When Ben Bernanke raised the prospect of a tapering of the US Federal Reserve’s monthly bond purchases in May, the impact on EM currencies was immediate: they slumped. By August, their decline in some instances was looking like a rout – the Indian rupee, especially, seemed on the brink of an all-out crisis.

But then something changed. Currencies around the emerging world began to recover. EM borrowers are once again tapping eurobond markets at low yields. Big EM central banks, it seems, have seen off speculators: Brazil’s by intervening in currency markets, for example, Indonesia’s by raising rates. Has the EM story entered yet another new chapter? The answer, almost certainly, is “No”.

Analysts have had no difficulty explaining the collapse of EM currencies since taper talk began. QE inflows had driven EM currencies up; QE outflows would naturally drive them down."

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