Société Générale: "Emerging Market Dominoes to Fall..."

From Bloomberg:

The worst month in a year for emerging-market currencies will prove to be more than a momentary bout of weakness to strategists at firms from UBS AG to Societe Generale SA who see the Federal Reserve weaning investors off its extraordinary stimulus.

South Africa’s rand led declines among the 24 developing-nation currencies tracked by Bloomberg last month, tumbling 11.3 percent. JPMorgan Chase & Co.’s Emerging Markets Currency Index (FXJPEMCI) fell 3.3 percent, the most since it slipped 7 percent in May 2012. Only China’s yuan gained, rising 0.51 percent.

“For these emerging-market currencies, this is the beginning of a trend that perhaps is going to be longer and deeper in terms of a correction,” Tom Levinson, a currency strategist in London at ING Groep NV, the largest Dutch financial-services firm, said in a May 31 phone interview.

No other currencies benefited more from at least $2.5 trillion of cash that the U.S. central bank pumped into the financial system to pull the economy out of a recession. Now that Fed Chairman Ben S. Bernanke has signaled the central bank could start pulling back if it sees sustained economic improvement, investors are backing away from developing nations, especially those with higher deficits and weaker growth....MORE