A currency trip around Emerging markets

How are various emerging market currencies behaving currently.

In a world replete with narratives around de-dollarization and supply chain shifts, it would be an interesting exercise to see how the currencies of various Emerging markets are behaving v/s the US$.

1. The winners

Mexico (MXN) - 8 yr high, Brazil (BRL) - post Covid high

2. The middle layer

Korea, Indonesia, Thailand, Malaysia, Philippines & Vietnam - KRW, IDR, THB, MYR, PHP, VND - are all 5-8% off their Oct’22 lows .

3. The EM proxies

Canada, Australia - CAD & AUD - are also similar to the middle layer of EM currencies listed above.

(These countries have catered to EM demand given their large commodity bases. Also their currencies are much more liquid than EM currencies. Hence they trade as proxies for EM economic strength)

Negative Correlation with the US Dollar

The middle layer of EM currencies and the EM proxies are behaving in sync with the Dollar index (DXY) i.e. they are off their lows to a similar extent as the DXY is off its highs.

Let's ignore the basket cases - (Turkey and Argentina) TRY & ARS and (Russia) RUB - doesn’t trade freely anymore.

4. The rear end

India, China, South Africa, Taiwan - INR, CNY, ZAR & TWD - all at or near their lows! (have inverted here for simplicity of understanding so a high on the charts below means a low on the currency).

So ironically enough, the ‘ICS’ of BRICS are actually at their lows v/s the USD!