Recent EM currency falls partly a result of euro weakness

There are good reasons to think that some EM currencies remain exposed to market turbulence as we move towards the first interest rate hike in the US. However, suggestions that the recent falls in EM currencies against the dollar are due to concerns about a slowdown in capital inflows are wide of the mark. The latest bout of EM currency weakness largely reflects the depreciation of the euro against the dollar, rather than home-grown economic vulnerabilities.

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