MUFG's Head of Research Derek Halpenny remains constructive on EM FX for 2026, citing supportive global growth, restrained US tariff risk, and ongoing fiscal and monetary stimulus in major economies. He highlights strong performance in BRL and MXN, low and falling inflation across key EMs, and forecasts notable gains in ZAR, CLP, MYR and KRW, aided by a recovery in Japanese Yen and CNY.

Supportive macro backdrop and low inflation

"If it does result in a warming of relations it would be another factor that can help support global sentiment and would reinforce the prospect of EM FX continuing to perform well."

"We are generally constructive on EM FX this year and are forecasting some notable gains in certain EM currencies this year."

"LatAm FX is leading the way so far in 2026 and BRL and MXN are the top two performing EM currencies on a year-to-date basis."

"Our top picks in EM this year include ZAR and CLP (close to 7% gains by year-end) while MYR and KRW are set to gain by around 5% and should be helped in the Asian region by a recovery in JPY and further moderate gains for CNY."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)