EM currencies have resumed their rollercoaster ride over the past couple of weeks – first weakening on the back of renewed expectations that the Fed might start to taper its asset purchases by the end of the year and then rebounding following what were perceived as dovish comments from Janet Yellen. The key point though is that despite the recent gyrations and the continued uncertainty over the timetable for tapering, the Fed is still likely to start withdrawing stimulus at some point over the next six months. In this Update we take a step back and attempt to identify those currencies that are likely to be hardest hit when the Fed eventually tapers and – more importantly – those where weakness could be long-lasting.
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