Lates News

This week, the volatility of emerging market currencies has exceeded that of developed markets for the first time since May of last year. The J.P. Morgan Emerging Market Volatility Index rose above similar G7 currency indicators on Tuesday, ending a streak of 209 consecutive days where the former was lower than the latter, marking the longest period since data was recorded in 2000. Mingze Wu, a foreign exchange trader at Singapore's StoneX Financial Pte, said, "The volatility of emerging market currencies is being affected by the escalating situation in the Middle East and the drastic fluctuations in Asian stock markets. Once the situation in the Middle East calms down, volatility should decrease." This week, almost all emerging market currencies against the US dollar have fallen, but this may not necessarily change the broader context: strong commodity prices and stable capital inflows continue to support demand for emerging market assets, making arbitrage trading attractive, while the US dollar as a whole is weakening. Wee Khoon Chong, a strategist at Mellon Bank in New York, stated, "Oil prices are a key driving factor behind the weakness of emerging market currencies and the recent increase in volatility. If the situation in the Middle East eases, the demand for high-yielding emerging market currencies for arbitrage may rise, leading to a decrease in foreign exchange volatility."