Analysts expect a surge in investment flows to emerging markets after the US Treasury’s bond buyback plans weakened the dollar. Global emerging market bond funds recorded inflows of $967 million in the past week, up around 15% from the previous week. Brazil and Turkey are favored destinations due to their high interest rates, with Brazil’s benchmark rate at 14% and Turkey’s one-week repo rate at 37%. The South Korean won strengthened 2.83% against the dollar since the announcement, the Brazilian real gained 0.64% and the South African rand 0.59%. Asian currencies, however, are expected to continue underperforming their EM peers, making them less attractive for carry trades.
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