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Trade

MarketEye: Can
currency protect
against market
shocks?

Colm McDonagh, head of EM fixed income – Insight investment1

 

One major change in recent years is how policy makers in many emerging markets have become comfortable with using currency as a buffer to insulate their economies from negative shocks.

 

Among the first lines of defence against any political, economic or external shock is to allow currency weakness, with authorities only stepping in to counter falls once they become significant enough for inflation pass-through to become a concern. As such, management of currency risk in order to control volatility and avoid potential losses has become even more important.

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Sources:

1 Investment Managers are appointed by BNY Mellon Investment Management EMEA Limited (BNYMIM EMEA) or affiliated fund operating companies to undertake portfolio management activities in relation to contracts for products and services entered into by clients with BNYMIM EMEA or the BNY Mellon funds.

 

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