The Rupee continues the free fall move today and the FX has now moved 15% from levels we saw in January.

Despite India’s current account deficit reported narrower than the market expected, it had still widened, making investors clearly shaky.

Investors across the emerging markets space are increasingly nervous about the fact many of these countries have unsustainable fiscal and current account deficits. Add to the mix a rising inflation and you will understand large investor’s fears.

JPM emerging market fx index simply can’t catch a bid.

Note that even though the fx space has calmed down a bit over past days, JPM emerging market fx volatility index continues to go up.

With regards to the EM equities space the EEM US trades right on the levels from where we bounced off in August. The 41 area is massive. Who knows, maybe the sentiment turns rapidly out of nowhere, but it would be a nervous long given the pace and direction of this last sell off. A break below the 41 level and this could get real fluid.

Source: charts by Bloomberg