June 23rd, 2020
Emerging markets are breathing a collective sigh of relief as a worldwide dollar crunch that defined the unfolding COVID-19 shock eases considerably thanks to the speedy Federal Reserve actions to provide dollar liquidity to all corners of the planet. Data from the Fed last week showed demand for emergency dollar funding now abating as private funding markets start functioning again. Many major central banks cut the frequency of such facilities as a result. Reduced scarcity of dollar funding has also seen the exchange rate retreat and should allow greater monetary policy support in ailing developing economies, with Mexico and Turkey expected to cut interest rates again later this week. Emerging sovereign bond indices in local currencies show yields fallen to record lows below 5% and the scale of emerging market easing now surpasses that of the 2008 crisis.
Charts by Ritvik Carvalho and commentary by Mike Dolan
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