Having remained resilient over the past months, inflows into EM bonds and equity markets have turned negative in recent weeks. Inflows into Turkey have weakened despite August’s sharp interest rate hike and while India has continued to see notable inflows, they have softened from July peaks. However, the narrowing of current account deficits means that many EMs have decreased their reliance on capital inflows. So if risk appetite worsens, currencies are less likely to suffer large falls than last year.
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