With bond yields stabilising and the dollar weakening, the relative attractiveness of non-U.S. assets improves, potentially boosting foreign direct investment and portfolio inflows to emerging markets.
Moreover, the relief rally comes after a recent stretch of harsh corrections: only a few weeks ago global equities tumbled as investors braced for sustained high borrowing costs, and that memory keeps credit, currency and emerging-market risks very much alive.
For emerging and frontier economies, especially those reliant on foreign-currency debt or commodity exports, the consequences could go either way. On one side, easier financing conditions, a weaker dollar and stabilizing investor sentiment could ease debt-service burdens and encourage fresh investment.
On the other, any renewed tightening, or a surprise macro-shock, could once again destabilize currency markets, raise debt…
