Thursday, November 29, 2018

This year’s EM sell-off underscored the importance of FX valuation with markets, in dramatic fashion, going after meaningful FX overvaluations. At this point, our models signal neutral or cheap valuations for much of EM, so that currency misalignments are less of a risk factor as we approach 2019. But a positioning overhang in emerging markets remains a material risk factor, given the intensity of capital flows to EM resulting from G-3 monetary stimulus. This piece starts a series of Global Macro Views on EM flows and positioning, which we kick off today by looking at flows over the EM sell-off this summer.

IIF Authors

Robin Brooks

Managing Director and Chief Economist

Gregory Basile

Senior Research Analyst