Analysis-Wild currency swings put emerging markets in the spotlight

By Nell Mackenzie, Dhara Ranasinghe and Alun John

LONDON, Dec 15 (Reuters) - Trading successful the Hungarian forint, agelong a niche emerging marketplace currency, has much than doubled since U.S. President Donald Trump took bureau successful January, with trader involvement lone increasing since his sweeping "Liberation Day" import tariffs announcement.

These accrued volumes are nary blip either, accidental traders, strategists and hedge funds navigating the astir $10-trillion-a-day planetary FX ​markets.

The forint has strengthened astir 20% against the dollar this year, acceptable for its champion twelvemonth successful astir a 4th of a period and making it 1 of 2025's apical emerging currency performers.

It has ‌been a bully twelvemonth much widely: MSCI's Emerging Market Currency Index deed a grounds successful July and is connected people for its champion twelvemonth since 2017, having gained much than 6%.

Traders, money managers and analysts spoken to by Reuters mostly expect this inclination to proceed adjacent year, ‌too.

The gains travel arsenic a much volatile and weakening dollar prompts investors to rethink vulnerability to the currency and question long-held assumptions astir the absorption and lasting of the greenback.

Meanwhile, they are betting connected improving worth crossed immoderate processing countries from South Africa to Hungary arsenic they diversify distant from U.S. assets.

"We deliberation that the rhythm of what we would telephone a carnivore marketplace for EM currencies, which has lasted for 14 years now, has apt turned," said Jonny Goulden, caput of EM Fixed Income Strategy Research astatine JPMorgan. "That is portion of this crook successful the dollar cycle, wherever the satellite owns a batch of U.S. assets and has avoided EM assets."

TRADING RISKS DRAW IMF WARNING

For Elina Theodorakopoulou, portfolio manager for emerging markets indebtedness ⁠at Manulife, the astonishment this twelvemonth was that terms swings were triggered by ‌events successful developed economies.

"It was the chill kid successful the people this year, emerging markets, successful the consciousness that it wasn't the operator of volatility," said Theodorakopoulou.

The U.S.-driven splintering of satellite trade, geopolitical upheaval and divergent cardinal slope argumentation is expected to proceed to thrust terms moves.

Investors, including hedge funds, are making and losing money, portion for governments, appreciating currencies ‍and superior inflows person large economical implications, from reducing the entreaty of exports to bolstering their quality to rise and repay debt.

The risks person not gone unnoticed. The International Monetary Fund successful its latest fiscal stableness study warned astir dangers from currency markets.