Goldman Sachs: EM Currencies in for a Hard Time

A dovish statement from the U.S. Federal Reserve on Wednesday is but a small setback for the U.S. dollar, with the greenback set to extend its rally against emerging market currencies, according to Goldman Sachs.

“Federal Reserve dovishness may provide some near-term respite, but on a 12-month basis we think that some of the factors arguing for EM currency weakness, such as current account imbalances, commodity price weakness and low inflation, are still present in varying degrees,” Goldman Sachs said in a note published on Friday.

The U.S. dollar weakened broadly on Wednesday after Fed Chair Janet Yellen’s more-dovish-than-expected comments tempered expectations for a rate hike as early as June. But the greenback quickly recovered in the following session as investors digested the news.


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