Emerging Currencies Retreat on Signs Fed Rally Overdone: Chart

After surging 5.2 percent in the three weeks through Friday, the biggest gain since 1998, emerging-market currencies are coming back down to Earth as the euphoria of the Federal Reserve’s dovish turn wears off. A Bloomberg gauge of developing-nation exchange rates declined for a second day on Monday as a rebounding dollar pushed down commodity prices. The rally was probably temporary as history tells us net capital flows in the region will not accelerate until emerging-market growth improves relative to the Group of 10 nations, Jason Daw, head of Asian foreign-exchange strategy at Societe Generale SA in Singapore, wrote in a report.

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