The US Federal Reserve signaled a possible interest rate rise in its released meeting minutes last week. The indication jarred emerging market stocks.
The dollar went up while commodity and equity prices declined sharply on the news.
The MSCI Emerging Market Share Index lost almost 3 per cent in the last week while Russia's double, South Africa's rand, and Turkey's lira all weakened against the dollar.
“The rally in March and April was only ever about short-covering,” says Bryan Carter, head of emerging market fixed income at BNP Paribas Investment Partners. “Investors were so pessimistic about a long period of bad headlines and weak data that they were severely underweight by the start of the year. All they did was go from underweight to neutral.”
Read more at the Financial Times.