While August nonfarm payrolls provided further evidence of a strong U.S. labor market, any ensuing optimism about the domestic economy may spur more pain for emerging markets.
Recent gains in the U.S. dollar against currencies such as the Turkish lira, Russian ruble, South African rand and Argentinian peso, have helped make debt financing for most issuers in these countries more challenging, and have generally led fixed income investors to lower their risk tolerance.
Intensifying global trade tensions between the U.S. and its trading partners, as well as geopolitical uncertainties, including Turkey's ability to contain inflation