Emerging Market Currencies are Emerging on Sell Lists


Currency traders have soured on some emerging market currencies this week, and the fun may just be starting.

The crisis in Japansparked a widespread rush to safe havens, and in the currency markets that has meant a rush into Swiss francs, the dollar, and even the yen.

"We are seeing net outflows from select higher yielding currencies such as the South African rand, Russian ruble, Hungarian forint, Brazilian real, Argentine peso and Turkish lira as market participants pare their exposure to riskier assets," wrote Samarjit Shankar of BNY Mellon.

J.P. Morgan today also took a dim view of emerging-market currencies, cutting the currency exposure in its Global Bond Index-Emerging Markets portfolio by 10%, with especially large reductions in the Brazilian real, the Chilean peso, and the Russian ruble.

In its announcement, Morgan noted the "risk of the repatriation of Japanese investments into EM local debt" - the risk that Japanese investors will sell emerging-market currency-related debt to buy yen. Sounds like there could be some emerging-market excitement ahead.

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