Emerging market currencies are on track for their worst first half of the year since 2020, pushed lower by an unexpectedly strong dollar and an unwind in a popular trading strategy across Latin American markets.
JPMorgan’s emerging markets foreign exchange index has fallen 4.4 per cent so far this year, a drop more than twice as large as the same period in the three previous years. The move has come as investors have torn up hopes of rapid US interest rate cuts in 2024 and nerves around weakening economies and expansive fiscal policies have pushed currencies in some major emerging markets lower.
“It’s the combination of a more resilient economy in the US and, on the emerging markets side, emerging markets like Chile, Hungary and Brazil have kept cutting rates,” said Luis Costa, global head of emerging markets strategy at Citigroup.