Emerging Markets (EM) inflation set a new cycle low in September. Due to falling inflation, bond yields in real terms have barely budged in the past decade, while developed market bonds trade with negative real yields across the board. This paper represents an update on EM inflation and local currency bond yields and what their implications are in terms of returns going forward. The paper then takes a very close look at the outlook for EM currencies over the coming years. Based on current valuations, EM local bonds should return close to 30% compounded over the next five years, but in US Dollar terms returns could be as much as 20% higher if, as we expect, a slowdown in the US and continuing weakness in productivity growth begin to weigh on the Dollar. The paper also discusses the main risk to a bearish view of the Dollar over the medium term.