We all know the Emerging Markets violent moves earlier this summer. Since then, most of these markets have managed stabilizing, resulting in currencies gaining, volatilities falling and equities trading higher. Below are a few Emerging Markets charts worth reviewing post the recent moves.
The JPM EM FX index has gained some lost ground during September. Note the index has now reached up to the negative trend as well as the 50 day moving average. This trend has been in place since March and is very strong.
Global FX volatility has fallen.
We have seen a similar move lower in Emerging Markets FX volatility. Volatility has fallen from 13 to 10.
Another FX cross that has starting moving again is the Turkish Lira. The TRY is moving on the back of rather extreme inflation figures out today. Note the perfect bounce on the 50 day average.
Source: charts by Bloomberg
Is all well with the Emerging Markets space? The picture is a bit more complex than a simple yes or no. We are still seeing volatility in India as one example, while Brazil on the other hand has seen equities surge lately. The USD denominated debt situation remains the same. Italy has also fuelled some extra risk off sentiment not to be ignored.
While the US markets continue grinding higher, chasing Emerging Markets here seems a bit late. Watch the FX charts carefully as this is where the moves most likely will start first (again).
