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The time for a Dollar Accord has arrived

Market Commentary

10 February 2016

When Muhammad Ali graced the boxing ring he would let himself be beaten to a pulp for eleven rounds only to floor his exhausted opponent with a single knockout blow in the twelfth. Ali’s strategy is known as the rope-a-dope, where, instead of moving around the ring the boxer fights for extended periods leaning back into the ropes in order to soften the heaviest blows. Emerging Markets (EM) have been doing the rope-adope for several years, absorbing huge punishment. The pummelling of EM began in the currency markets soon after the onset of QE policies in developed markets. Since 2011, markets have landed a succession of vicious blows on EM, including a mean Taper Tantrum upper cut, a bare-knuckle collapse of commodity prices, the Dollar hook and a stinging jab from the Fed. EM should have hit the canvas after so many knocks, but a decisive knockout blow was never dealt.

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