Emerging Market FX back at Asian crisis levels

Emerging Market currencies have been hit over the summer, with the JP Morgan Emerging Market Currency Index (FXJPEMCI) reaching its lowest level on record with e.g. TRY and MXN trading at their weakest level ever. The latest rout has been led by Latin American currencies whereas the CNY and Eastern European currencies have outperformed. Explanations put forward include: 1) the commodity collapse; 2) Fed rate hike explanations; and 3) China's equity rout. 

The oil price collapse has driven the collapse in the COP, RUB, BRL and ZAR in line with its usual correlation whereas the collapse in copper prices has driven the fall in e.g. the CLP.

According to Danske Bank, "The fall and volatility in Chinese equities have NOT been the driving force in the EM FX sell-off. The transmission mechanism from Chinese equities to China's economy is low and China's equities historically have a low correlation with risk appetite and EM FX performance. However, the Chinese economy appears to be rolling over again with the July PMI Manufacturing falling to 50.0, the lowest level since February."