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Dollar index at 4-month high, emerging markets restless

The dollar index, which tested 92.67 in Asian transactions on Thursday morning, is assessing that the US economy will remain insensitive to inflation during 2021 and economic recovery earlier than other developed countries. While the euro / dollar fell to 1.18, Bloomberg headlined “The King’s Cash for Emerging Markets (GOP, Countries = EM).” This morning, Asian markets are also restless with sales reaching 15% peak to low in China. In Asia, GOU FX is falling against the dollar. If the rise in the dollar index continues, it can break 8.00 on the dollar / TL.

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According to Bloomberg, global funds, which now find attractive yields on US government bonds, have begun to be selective among developing countries. The markets of countries with high Central Bank reserves and low external borrowing needs will be preferred. In this context, Russia, the Republic of South Africa and Indonesia are among the most attractive destinations.

Bloomberg stresses that developing countries should write off $ 3 trillion before the end of the year, and explains that rising bond yields and the dollar index restrict the Treasury’s area of ​​action. In addition, there are other developing countries to jump the risk of concussion occurred in Turkey.

In general, Asia is prepared for possible external shocks with the power of the balance of payments, but there is anxiety in Latin America and our region due to the increase in Covid-19 cases and generally weak growth.

States are caught between rising borrowing costs and transferring income to unemployed SMEs amid the ongoing epidemic and on the brink of bankruptcy.

EU bond yields tumbled in the past week on reassuring remarks from Janet Yellen and Jay Powell. The turmoil in many developing countries, especially Turkey, also increases the attractiveness of bonds as a safe haven. However, according to many experts, the interest on US 10-year bonds, which is still around 1.6%, could soon reach 2%. It is difficult to find a reasonable forecast in the dollar index, but it is inevitable that speculators who have been shorting the dollar and have been losing steadily since the beginning of the year will close their positions.

Turkey, struggling with its own internal problems, developing countries to escape the hot money may produce a new source of instability.

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