RISING interest rates in the US will make it difficult for emerging-market (EM) countries to attract capital to their shores and subject their currencies to increasing pressure, according to Swiss financial services giant UBS.
UBS AG, in its UBS House View-Year Ahead 2016 research note, said the recent US rate hike and the anticipated rate adjustments after that would make it harder for emerging nations to attract capital and that, as a result, EM currencies were to remain under pressure again after a particularly bad year in 2015.
Its analysts see 2016 would likely be better, but only moderately.
UBS Wealth Management Global Chief Investment Officer Mark Haefele said US faces a transition away from an era of zero interest rates/ zero inflation.
The US dollar was likely to remain strong for much of 2016, with the Fed increasing interest rates.
UBS said among the more attractive currencies in the emerging markets is the Philippine peso. “We expect the currency to be relatively more resilient in an environment of rising US rates, thanks to the Philippines’s stable current-account surplus and robust domestic-growth outlook,” its analysts said.
Considered the most vulnerable currencies in the region were the Indonesian rupiah and the Malaysian ringgit.