SINGAPORE (Jan 10): Yields on USD emerging market debts are reaching 7% for major indices, and as emerging markets enter 2019, it is expected to recover from the negative effects of a stronger USD and outsized US growth, according to a Schroders TalkingPoint report for January.
These effects shifted liquidity away from the asset class, similar to the 2014-2016 period when the Fed first began ending quantitative easing and raising interest rates. Also much like that period, currencies have been the adjustment mechanism of choice for stressed countries.
Despite deeply negative local returns, countries for the most part avoided spending foreign exchange reserves in an attempt to stabilise the currency.
