Emerging-market currencies are proving more stable than those in developed nations, a streak some investors say could become the longest in more than two decades.<\/p>\n
JPMorgan volatility indexes show developing nations\u2019 currencies have swung less than their Group of Seven peers for nearly 200 straight days \u2014 the longest stretch since 2008. If it passes 208 days, it would mark a record going back to 2000.<\/p>\n
The unusual calm in the cohort usually regarded as riskier is being driven by a mix of factors. A weaker dollar and expectations for gradual Federal Reserve easing have reduced pressure on developing markets. Meanwhile, strong commodity prices and robust capital inflows have supported demand for emerging-market assets. That backdrop is reinforcing the appeal of the carry trade, according to JPMorgan Asset Management.<\/p>\n
\u201cEM currencies remain a carry trade, hence the controlled volatility environment will continue to attract ongoing inflows into EM local assets,\u201d said Jason Pang, a fixed income portfolio manager at the money manager in Hong Kong.<\/p>\n
![\"\"](\"https:\/\/www.moneyweb.co.za\/wp-content\/uploads\/2026\/02\/449615656-555x312.jpg\")
<\/p>\n
ADVERTISEMENT<\/p>\n
CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n
The carry-trade strategy \u2014 borrowing in low-yielding currencies to invest in higher-yielding emerging-market assets \u2014 thrives in calm conditions and can help stabilize currencies by sustaining inflows. Investors have poured money into emerging markets this year at the fastest pace for the period since 2019, according to a Bloomberg capital flow proxy gauge, extending last year\u2019s surge, which was the largest since 2009.<\/p>\n
The inflows are supporting performance. A Bloomberg index of eight developing-market currencies has risen about 2.8% so far this year, extending last year\u2019s stellar 17.5% advance.<\/p>\n
Structural factors are also helping to keep market swings contained.<\/p>\n
Improvements in emerging-market fundamentals, relatively stronger growth than in developed economies and ample FX reserves should help keep emerging-market currency volatility subdued this year, said Matthew Ryan, head of market strategy at Ebury Partners.<\/p>\n
In contrast, developed-market currencies have faced turbulence. Broad dollar implied volatility rose earlier this year after US President Donald Trump threatened tariffs on Europe as part of his push to acquire Greenland, alongside uncertainty over the Fed chair announcement.<\/p>\n
ADVERTISEMENT:<\/p>\n
CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n
Yen volatility has also climbed amid concerns about Japan\u2019s fiscal outlook and possible intervention by authorities. It could face further pressure if the yen carry trade unwinds, a risk that\u2019s been referred to as a \u201cticking time bomb.\u201d<\/p>\n
Concerns over US exceptionalism and the country\u2019s fiscal path have also prompted some investors to look beyond the dollar.<\/p>\n
\u201cInvestors are looking at less volatile currencies in the emerging market space, such as the Singapore dollar, the baht and the yuan in Asia,\u201d said Daniel Tan, a portfolio manager at Grasshopper Asset Management. \u201cThis trend of low volatility for EMFX can continue until we see the next tail risk event.\u201d<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
Follow Moneyweb\u2019s in-depth finance and business news on WhatsApp here.<\/em><\/p>\n<\/p><\/div>\n