FXStreet reports that economists at Capital Economics think emerging market currencies will resume appreciating against the US dollar before long.

“We doubt that interest rate differentials between EMs and the US will widen by much. For one, we think US yields would only rise a little, if at all. What’s more, because EM central banks are generally exerting less downward pressure on government bond yields than their DM counterparts, a rise in US yields could well lead to higher EM yields too. This means the interest rate differentials would not change much, limiting any downward pressure on EM currencies.”

“We suspect investor appetite for risk is likely to remain strong, amid the backdrop of a rapid economic recovery and supportive monetary and fiscal policy. This is particularly important for EM currencies, since EM assets are generally seen as riskier investments than their developed market equivalents.”