The risk profile of emerging markets FX in 2022

Published on 26 September 2022

Both developed (DM) and emerging market (EM) FX trading is being bucked by volatility this year. Emerging markets, an umbrella term covering many disparate markets with both major and minor currency pairs, suffers from a more fragmented liquidity and risk picture than developed market currency pairs.

This has a major impact on the ability of investment firms to trade in EM equity and bond markets when an FX trade is also required. When liquidity is not guaranteed, and markets are unpredictable a buy-side desk can struggle to model the risks of EM FX trading effectively.

Dmitry Kay, co-head of EMEA and EM FX and short-term interest rates of UBS tells us how he sees investment firms fighting to overcome such risks, and what they should look for in a partner to lighten this burden.