"If the Fed shocks, the main shock absorber in emerging markets is the currency. And I find the most vulnerable currencies from Fed shocks are the Turkish lira, the Indonesian rupee, the Brazilian real and the Malaysian ringgit."
Maratheftis said a Federal Reserve interest rate hike in June is priced in as far as emerging markets are concerned.He argued the Federal Reserve wants to hike rates because it needs the flexibility to deal with any economic slowdown.
"If you expect a boom in the U.S. economy you will be disappointed. The reflation trade is not going to materialize.
"The U.S. economy is doing a little bit worse than most people realise but the Fed wants to hike," he added.
Maratheftis said the Fed could raise rates 3 times this year and run down its $4.5 trillion dollar balance sheet at the same time.
The economist added that he doesn't foresee a multi-year hiking cycle as the Fed's tightening will be "short and front loaded".
Source: Bloomberg
Trader Bozhidar Arabadzhiev
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