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Tuesday, 19 February 2019

EM currencies begin giving traders the jitters

EM currencies begin giving traders the jitters: Currency traders are beginning to take note of risk in individual emerging-market currencies, Bloomberg reports. EM saw a deluge of inflows at the start of the year, becoming Bank of America Merrill Lynch’s “most crowded” trade for the first time ever. However, developing risks in individual countries are now starting to weigh on traders’ minds. The MSCI FX index has experienced two consecutive weeks of losses for the first time since September, and almost fell below the 100-week average at close on Friday.

Which EM currencies are most at risk? Events in South Africa and Nigeria last week caused currency and equity sell-offs in both countries. The South African rand became worst-performing EM currency, as a potential bailout of the debt-laden state electricity company Eskom prompted warnings of a sovereign downgrade. Meanwhile traders exited the Nigerian naira and sold stocks yesterday after the last-minute delay of the country’s election fuelled concerns about political instability.

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