Morgan Stanley is dialling back its bullishness on developing-market currencies

  • an imminent sell-off may not occur
  • positioning has clearly increased
  • we expect less help from the weaker dollar

MS see wider market implications also, take note of the following for any of your 'risk' trades (if you agree with MS that is):

  • This also leaves less risk premia to deal with any potential deterioration in sentiment around U.S.-China relations ahead of the U.S. elections or the spread of Covid-19 in EM
  • Developments around a vaccine and its broad availability to EM are crucial for the asset class to present a meaningful rally from current levels
  • Information should only come later in the year, which adds to our view for a pause, along with risks relating to the U.S. presidential election.