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Valuations should limit weakness in EM currencies

Emerging market (EM) currencies have continued to slip against the dollar, probably in large part due to rising bond yields in the US and a global increase in risk aversion. We suspect that US Treasury yields will climb further this year, and that risk appetite will decline as the US economy slows in 2019. While this points to further EM currency weakness, valuations suggest that falls may not be very large.

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