(Harvest) Over the three years of 2013-2015, the cumulative performance of the local currency index was negative 29.6%. Currencies in the index were down on a nominal basis, on average, 50%. Unlike other deeply negative environments for EM, there was not a single blow-up or risk catalyst like the Mexican peso crisis of 1994, the Asian financial crisis of 1997, or a US equity crash. It was just a slow painful bleed that by contrast seemed to happen in a somewhat stealthy manner. That, and the fact that there was no serious default or credit crisis in the asset class, allowed this period to go under-appreciated as a painful adjustment phase. But quietly painful it was, and broadly speaking foreign exchange reserves fell, inflation rose sharply and interest rates had to rise in response, with growth also declining.
Why Emerging Market Fundamentals are Positive For 2017
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