Risk rally built on shaky..........>

EMERGING MARKETS: Risk rally built on shaky foundations

-EMFX sits higher early Tuesday, with ZAR, TRY and broader Asia-Pac currencies

benefiting from China's PBoC putting a floor under the CNY. While China were

formally designated a 'currency manipulator' by the US Treasury, the bounce in

regional equity markets in Europe and US index futures has helped prompt some

short-covering among those currencies hit hardest.

-KRW is one of the standouts, however, which hit new multi-year lows against the

USD ahead of the close at 1,223. This keeps USD/KRW bulls well within range of

2016 highs at 1,245.

-However, those looking for a protracted rally in EMFX may be left wanting.

While implied vols have retraced, they remain at elevated levels, suggesting

risk sentiment could reverse very quickly. Much of this depends on how much

further the current US-China spat escalates - which should increase focus on the

output of Trump's Twitter feed headed into the weekend.

-The data schedule is light, with focus remaining on Wednesday's rate decisions

from the Indian and Thai central banks.