While recent economic data has been mixed, market participants continue to wait with trepidation for the latest FOMC meeting minutes to be released later today.  Against a backdrop of unprecedented policy moves in China and the knock on effects of capital flight from emerging markets, traders will be looking for guidance from the Fed as markets’ begin to doubt the immediacy of the Federal Reserve’s anticipated rate increase.

Emerging Markets continue to be pounded by the double barrelled effects of an eventual Federal Reserve rate tightening and increasing uncertainty around the effects of slower economic growth. As it stands now, over a trillion dollars of capital has flowed out of emerging markets in the last 13 months which is a figure that is significantly higher than the capital flight seen during the height of the financial crisis.  This capital flight is contributing to a significant uptick in volatility in both emerging market stock indices and currencies. Symptomatic of this has been today’s performance of the Shanghai exchange which at one point today was down 5% before rallying to close 1.2% higher. Outside of China we have seen what may be the start of an Asian currency war with the Vietnamese dong seeing its third devaluation of the year and the ringgit and rupiah trading at lows not seen since the 1997 Asian financial crisis.

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By Guest