The recent communications of the Federal Open Market Committee appear to have reinforced the likelihood of a tighter stance, which in turn has sustained US dollar strength. By contrast, growth in the euro area and Japan slowed, leading to a reassessment of expectations of early withdrawal of monetary policy accommodation in these regions.
In addition, the strong dollar effect dominated global markets, which saw a reversal of capital flows from emerging markets, reminiscent of the so-called taper tantrum in 2013. While most emerging markets are assessed to be more resilient to these developments than was the case at that time, their exchange rates and bond yields have come under pressure, although experiences have differed widely.