Source: Bloomberg

We were just talking about the world’s sensitivity to US interest rates, and emerging market currencies are a case in point. Turkey’s lira was down on the day, and turned around the moment the US inflation data came out.

So-called carry trade currencies (high yielders bought by hedge funds who borrow dollars or yen to earn the elevated interest rates on EM instruments) are hair-trigger sensitive to US rates. The carry trade proverbially means picking up pennies on the slope of a volcano. When the volcano rumbles the penny-pickers scatter; when the volcano seems benign they swarm back to the slopes.