USD: The dollar still pausing for a breath = continuing EM FX stability - ING

With the USD strength softening and the market still waiting for the next Trump administration-led trigger for the dollar higher, analysts at ING continue to observe a broad based consolidation/modest rebound in EM FX (even MXN seems to have found its near-term bottom).

Key Quotes

“We don’t see a near-term catalyst for EM FX performance to change (Q4 US GDP this Friday should not affect the current EM FX stability), but given the previous weeks’ gains in some fundamentally not so strong currencies (such as ZAR) and our view of the eventual return of the US reflation trade and higher UST yields, there may not be much time left for more meaningful EM FX outperformance.”