Emerging market exchange rates: cheap or value traps?

Capital Group
By December 1, 2020 09:19

Emerging market exchange rates: cheap or value traps?

Investment Insights

Over the past decade, emerging market (EM) currencies have weakened significantly and local currency bond investors have seen little exchange rate returns. In fact, EM exchange rates (FX) have been a major source of volatility …

Key Takeaways

  • Emerging market (EM) currencies have weakened significantly over the past decade and are now generally undervalued according to our in-house fundamental-based FX valuation model.
  • That said, a broad-based rally in EM FX is unlikely given the current global growth outlook and a decelerating EM credit cycle.
  • Low structural growth including rising debt burdens and low productivity are also a secular EM FX headwind.
  • We see value in select EM currencies including the Mexican peso and the Russian rouble

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Capital Group
By December 1, 2020 09:19


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