After a rough start to the year, emerging market currencies bounced back in April amid renewed investor appetite for risk. But if history is any guide, that trend may not survive May. Every year since 2010, bad news in Europe and the U.S. has made the fifth month of the year a gloomy one for developing world currencies, Credit Suisse says in a recent report entitled “Sell in May and Go Away.” In 2010, there was the Greek bailout, while 2011 saw a similar scenario in Portugal. In 2012, political instability worsened in Greece as elections failed to produce a coalition while Spanish bank Bankia asked for a government bailout. And last May, of course, the Fed announced plans to begin tapering, which triggered massive capital outflows. This year, the catalyst could very well be U.S. rates topping their highs for the year as growth strengthens and inflation inches higher. Geopolitical tensions in Ukraine and a weaker Chinese economy won’t help either.
First published in The Financialist in 2014.
JENS ERIK GOULD
Jens Erik Gould is a political, business and entertainment writer and editor who has reported from a dozen countries for media outlets including The New York Times, National Public Radio and Bloomberg News.