Emerging market currencies, excepting the Chinese renminbi, have given up all their gains since 2002, which marked the start of the commodities upturn, raising the question of whether the strong performance of developing economies during 2002-13 was all about commodities after all.
Data from Credit Suisse show that EM currencies at large have returned to a discount of more than 60 per cent to the dollar in purchasing power parity terms, a sharp rebound from the 40 per cent discount in 2011.
“The commodity supercycle started in 2002. That supercycle has ended and it’s not coming back, so it seems natural that we should be seeing a return to 2002 levels if not beyond,” said Win Thin, global head of EM currency strategy at Brown Brothers Harriman.