| Three weeks ago we wrote that the US dollar appears to be consolidating after staging one its longest dollar bull-runs since the 1990s (see Is the US dollar bull run over?, May 25. 2015). But while the US dollar index steadied as the Euro rallied the past three weeks, EM currencies continued their decline against the greenback. The strong US jobs data in May and the increased likelihood of higher US interest rates later this year have rekindled concerns over EM countries with high fiscal account and current-account deficits.
US monetary policy normalization: In last week’s article (see Bond yields rising, June 8, 2015), we mentioned that we are now seeing the initial stages of interest rate normalization. This may result in increasing volatility across markets over the short-term. As bond yields rise due to the prospect of the Fed rate hike later this year, global investors have slowly been deleveraging and moving money out of riskier EM assets this year...............................................Full Article: Source
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