As U.S Dollar Fades, Emerging Currencies Poised For Recovery In 2024: Report

by Money 08 November 2023

Emerging Currencies Poised For Recovery

The emerging market currencies will be taking well into the upcoming year to begin making certain noticeable profits against the retreating US dollar, amid a growing view that the cycle of interest rate has heightened, as was shown by a Reuters poll of FX strategists.

“After getting battered for most of 2023, emerging market (EM) currencies have made modest gains against the dollar after the Federal Reserve held interest rates steady last week, and data suggested the U.S. economy might finally be slowing.” – Reuters.

The weakening trend of the dollar was probably to hold in the near term, as most of the analysts in November. Three to seven polls of Reuters expected that the trade of dollars might lower by the end of this year.

However, with most of the EM central banks awaited to follow the Federal Reserve and cut down the rates in the next year, the respective currencies were quite unlikely to recoup the double digit losses that they have collected over the past few years.

“We’ve seen already some pretty sharp gains last week, but the recent gains aren’t extending because there is still uncertainty about the Fed … and at the same time the U.S. is still performing better than most other economies,” mentioned the Head of FX & EM Macro Strategy Asia for Barclays Mitul Kotecha.

“So it’s difficult to see the EM currencies recoup some of the sharp losses that we’ve seen in the last few months. That said, we do expect some gains, it’s just going to be a bit more of a gradual path.”

This would exclude the Russian rouble, which has almost lost 27% this year itself, and the Turkish lira, which is also down by 52%. Only just a few Asian countries, like the Indian rupee, the South Korean win, and the Thai baht, were anticipated to recoup the losses by the end of 2024. In recent terms, the rupee is known to trade within a narrow range.

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