{"text":[[{"start":7.65,"text":"A resurgence in the dollar has sent bets on the currencies of big emerging markets and major commodity producers into reverse, as a hawkish shift by the Federal Reserve upends what had been one of the strongest trades in FX markets this year."}],[{"start":22.200000000000003,"text":"Currencies such as the Argentine peso and Norwegian krone have been hit in recent weeks as markets have begun to price in higher US interest rates, boosting the appeal of dollar assets."}],[{"start":33.75,"text":"Underlining the shift, Kevin Warsh dropped the Fed’s longstanding bias towards easing rates at his first meeting as the head of the central bank on Wednesday. Traders in futures markets are now expecting a quarter-point rate rise by October."}],[{"start":47.9,"text":"“Expectations of a hawkish shift in US rates are reshaping currency markets,” said Rushabh Amin, a multi-asset portfolio manager at Allspring Global Investments. He added that this was undermining currencies that had offered the so-called carry of higher expected interest rates."}],[{"start":66.05,"text":"Brazil’s real, the Australian dollar and the South Korean won have dropped more than 2 per cent against the dollar in the past month, amid a pullback in currencies as diverse as the Malaysian ringgit and Canadian dollar. The Norwegian krone is down more than 4 per cent."}],[{"start":null,"text":"
"}],[{"start":82.19999999999999,"text":"By offering more competition for flighty capital, higher inflation-adjusted US bond yields can sap the attractions of everything from gold to stocks. "}],[{"start":92.14999999999999,"text":"“Growth in the US has been pretty strong, and we’ve seen US real yields have been pretty firm,” said Shaniel Ramjee, co-head of multi-asset investments at Pictet. “That came as somewhat of a surprise — the resilience of the US economy compared to what people thought a few months ago.”"}],[{"start":110.14999999999999,"text":"The Australian dollar, Brazilian real and Norwegian krone gained close to 10 per cent against the dollar this year up to the end of May, as the Middle East war pushed up commodity prices while investors still largely expected US rate cuts to boost what appeared to be a flagging economy."}],[{"start":127.85,"text":"But US interest rate futures markets are now pricing in one or two quarter-point rate increases by the Fed by the end of this year."}],[{"start":135.25,"text":"After whipsawing through the first weeks of the war, the dollar has climbed over the past month as the conflict has dragged on and inflation in the US has climbed above 4 per cent. "}],[{"start":145.55,"text":"Falling currencies have hit appetite in particular for dollar-financed “carry trades”, where investors borrow at relatively low US funding rates to buy the assets of countries with higher yields, such as Brazil, where base interest rates are currently 14.25 per cent."}],[{"start":162.3,"text":"“Higher US rates and [the] stronger dollar have triggered a reversal from some popular carry trades,” said Lee Hardman, senior currency economist at MUFG."}],[{"start":172.4,"text":"A reshuffling in global equity markets has also hit emerging market currencies in different ways. The Korean won has sold off amid big swings in South Korea’s red-hot stock market, with some investors taking profits on a stellar run in chipmakers Samsung and SK Hynix that has strained the concentration risk limits of institutional investors."}],[{"start":195.35,"text":"Currencies of energy importers that were hard hit by the Iran war are meanwhile up on the month, including the Indian rupee, Indonesian rupiah and Philippine peso, as central banks have raised rates or, in India’s case, boosted capital inflows by making it easier for banks to borrow overseas."}],[{"start":213.04999999999998,"text":"Despite the recent sell-off, fund managers are pointing to higher foreign reserves, relative fiscal restraint and more credible monetary policy across emerging markets, since the last round of US rate increases threw many countries into crisis in 2022 and 2023."}],[{"start":230.29999999999998,"text":"“The long-term case for better balance sheets in emerging markets over developed markets, particularly the US, remains,” Ramjee said. “Over the long term, the central bank orthodoxy that has been instilled in many emerging markets will endure.”"}],[{"start":245.64999999999998,"text":"A JPMorgan index of emerging market local currency bonds is up 2 per cent for the year. Fed rate cuts since 2024 and a retreat in the dollar last year helped power a long rally in emerging market bonds and currencies, but many countries also kept interest rates relatively high, enticing investors."}],[{"start":263.25,"text":"“What stands out for me is that this is the first major oil shock that has not triggered a broad-based emerging markets FX sell-off. Policy credibility has done a lot of heavy lifting,” said Kurt Knowlson, an emerging market debt portfolio manager at Aviva Investors. “There is not a one-size-fits-all emerging markets trade any more.”"}],[{"start":289.65000000000003,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1781853827_4622.mp3"}