Emerging Market Currency Values Are Not All About The US Fed

There is a consistent thread of discussion regarding the impending Fed rate hike and its impact on various markets, which are known to front-load the expected returns impact of the entire series of hikes in the first hike. Such forward expectations of relative value are common, as a change in interest rates impacts the expected returns not just in bonds, but any market that considers U.S. Treasuries as one barometer of return of “safe” assets. When return of safe assets rises, a value adjustment across the risk curve should be expected. What a higher U.S. interest rates does is increase returns expectations of “safe” investments, making them more attractive relative to risky alternatives, and thus change the expectation...