Relative calm in most EM currencies over the past month (the Colombian peso and Russianruble being the obvious exceptions) supports our view that emerging markets are generally well placed to withstand the onset of Fed tightening. Admittedly, countries with large external financing requirements (Turkey, South Africa, Malaysia, Colombia) and those with large dollar debts (Turkey, again) would be exposed in the event that a shift to tighter monetary policy in the US led to a pullback of capital flows from the emerging world. But for most EMs, balance of payments positions are sustainable, while dollar debt burdens are lower than at the start of previous Fed tightening cycles.
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