Inflation and the associated growth in bond yields in developed countries will lead to a decline in the exchange rates of those countries that belong to the category of young market economies in Europe, the Middle East and Africa.
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Analysts at the US investment bank JPMorgan predict this. However, according to them, there will be significant differences between individual countries, for example, the Czech koruna and the Russian ruble will do better.
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The assessment of expected inflation in the world is shifting from the word ‘temporary’ to the word ‘permanent’.
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“The assessment of expected inflation in the world is shifting from the word ‘transient’ to the word ‘permanent’, increasing the likelihood of a significant shift in core income,” Saad Siddiqui, an analyst at the bank, told clients. “Emerging countries’ currencies are unlikely to escape spotless in such a scenario,” he added.
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JPMorgan therefore changes its recommendations for these currencies and advises clients to reduce their weight in the portfolio as a whole to below average in relation to other currencies. So far, they have been advised to maintain a roughly equal percentage.
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However, the bank draws attention to the differences across the region. He assesses the prospects of South Africa pessimistically before the beginning of next year, where he sees growing risks. On the contrary, according to her, this year was relatively favorable. According to JPMorgan, the Turkish lira is also vulnerable, where the bank urges caution.
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However, the bank’s analysts continue to prefer the Czech koruna and the Russian ruble – in both cases they recommend clients to keep these currencies above average in relation to other currencies of countries referred to as the young market economies of the monitored region.
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“Thanks to impressive fundamentals, we continue to favor the Russian ruble, despite the recent increase in geopolitical risk,” the US bank told clients.
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