Business

The dollar keeps Citi and Morgan Stanley out of emerging markets

Buffeted by last month’s losses, emerging market investors are heading into the first week of April, with higher yields on US Treasuries and turmoil caused by a stronger dollar.

On Friday, stronger-than-expected US employment data prompted investors to assess their expectations of an earlier start to the Fed rate hikes. This, of course, fuels concerns that higher yields from the Fed Risk-free investing in the world’s largest economy could draw even more money away from emerging markets. Demand for assets from developing countries declined at the end of March. Flow to equity funds fell to less than a third of February levels, and bond funds closed the first quarter with more outflows, according to data compiled by EPFR Global.

Morgan Stanley says that the slow pace of vaccination applications in many emerging economies threatens the growth of emerging economies lagging behind the US, while the downward trend in emerging market currencies continues. Citigroup Inc. He believes that the course of US bond yields and the appreciation of the dollar index in the coming months will put more pressure on the currencies of developing countries.

“This could be big for a quarter and not very good for emerging markets,” said Luis Costa, head of strategy at CEEMEA at London-based Citigroup. “We do not believe that the adjustment to the US yield curve is over. Between now and June / July, we can see further performance growth here. “

Emerging market currencies and bonds fell for the first time in the three months ending March 31, falling on a quarterly basis on a yearly basis, with the dollar approaching its strongest since November. The shares fell for the first time since September, reducing earnings for the quarter.

Investors last month in Turkey, Russia and Brazil to increase the cost of borrowing after inflation in developing countries as they seek monetary policy clues this week, attention will turn the bus.

Bloomberg

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