From the FXWW Chatroom – The turmoil in Turkey poses spillover risks for EM as sentiment sours. In our view, the most vulnerable currencies are the ones that benefited the most in the recent weeks of EM stability, reflected by higher returns since end-June (Figure 1). As risk sentiment deteriorates, traditional safe-havens are poised to benefit. We recommend selling a basket of the ZAR, MXN and BRL vs. the JPY (target: 3%, stop-loss: -1.5%).
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