Emerging markets exchange traded funds holding bonds, currencies and equities finished higher last week after Janet Yellen, President Obama’s nominee to be the next Federal Reserve leader, made comments that some market participants inferred as a sign the Fed’s easing program could remain in place for far longer than previously expected.
However, the help for some downtrodden developing world currencies could be fleeting because a few of this year’s worst offenders have found it difficult to breakout out of their now long downtrends. Last week, volatility crept back into the India rupee and the Indonesian rupiah, 2013’s worst-performing emerging market currency, hit a two and a half year low against the dollar last Wednesday, Delphine Strauss and Robin Wigglesworth report for the Financial Times.
The WisdomTree Emerging Currency Fund (NYSEArca: CEW) was still able to muster a modest gain last week because although the ETF is allocated to some of the worst-performing developing world currencies, such as the rupiah, the fund includes decent allocations to some of the best. That list includes the Polish zloty and South Korean won. [Diverging EM Currencies Make ETF Less Bad]
Even with Yellen’s efforts to assuage jittery investors, some emerging markets currencies reside below their September recovery levels, according to the FT, indicating that weakness for some is more trend than fad.
What is most vexing about persistent weakness in emerging currencies is that Fed tapering does not appear to be in play in the near-term and it was tapering speculation that sent so many developing world currencies tumbling earlier this year. [EM Currencies: Still All About the Fed]