IIF says EM’s vulnerability to higher global rates seen rising

According to a note by the Institute of International Finance

  • Underlying vulnerability in EM to rising global rates is probably high
  • Many EM currencies have weakened as much or more than 2013, even though longer-term US yields this year have increased much lesser
  • Rising global rates beg the question whether Argentina is an idiosyncratic case or a harbinger of things to come
  • “We worry that it might be the latter, with broad vulnerability across EM to higher global yields”

The issue of emerging markets have been doing the rounds in the past few weeks – more so given the timing of the rise in the US dollar as well. There are serious concerns in the market if this could potentially blow up into something bigger, but for the time being market participants (or at least the majority) still believe that the risks are very much contained.

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