EM of Asia Depend on the Fed’s Monetary Policy
A large US banking holding Morgan Stanley said that emerging markets of Asia should hope that the Federal Reserve will continue its path of a gradual increase in the interest rate. Monetary policy of the US Federal Reserve System affects state of the dollar.
Most of the external debt of developing countries - 20% of gross domestic product - is expressed in foreign currency, with the largest component being corporate debt in US dollars. Total debt in foreign currencies in emerging markets, with the exception of China, increased from 22% of GDP in 2011 to 30% in the first quarter of this year.
Analysts also suggest that if the US dollar resumes consolidation in the near future, its negative impact on shares of companies from emerging markets may be noticeably stronger than for EM currencies.