FX traders pull back to vanilla strategies for emerging markets
Spreads tighten on many currency pairs but liquidity still patchy
Trading emerging markets currencies has fallen out of favour since the outbreak of Covid-19, with runaway volatility and blowouts in spreads for many currency pairs damping volumes in spot and forwards.
Although spreads are tracing back from their March highs, there are still reasons for caution, traders say.
“I don’t feel like we have necessarily hit the bottom because fundamentals now are shrouded with uncertainty. We’re probably going to see the impact of what’s going on in three months or
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