EM vulnerabilities return as the USD rises

EM private sector balance sheet mismatches (ZAR, TRY and MYR), foreign positioning in local currency bonds (CEE, IDR, ZAR and MXN), a dependence on foreign financing (CEE) and the lack of foreign currency reserves (TRY, ZAR, IDR) are likely to amplify EM FX moves.

"EM vulnerabilities are likely to become a point of interest for markets once again. Spill-overs from China add to the underperformance of manufacturing- vs. services-driven economies and calls for fundamental weakening in EM FX relative to the USD", says Barclays. 

The Figure explains details on measures that compare EMs on their vulnerabilities.