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EM Currency Drivers

EM FX
  • While real growth and real interest rate differentials remain the major drivers of currencies over time, this chart shows that sentiment has also been an important factor behind ZAR strength in the past year, and to a lesser extent behind MXN momentum.
  • On the other hand, sentiment has been extremely negative for BRL and TRY amid rising political and economic uncertainty. For instance, the increase in 'staff turnover' at the CBRT in March led to a significant depreciation of the TRY, which was down 10% that month).

Source: Bloomberg Economics

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