Emerging market currencies have been among the worst performers since Wednesday's election result, as investors fear President-elect Trump will ignite a trade war with key trading partners China and Mexico.
Surging US bond yields are also taking the shine off the relative yield of currencies through emerging Asia and Latin America.
![Greg Gibbs says there are fears around the effects of Donald Trump's anti-trade stance.](/web/20161117140704im_/http://www.smh.com.au/content/dam/images/g/i/r/0/a/h/image.related.articleLeadwide.620x349.gsojh3.png/1479105092650.jpg)
"The broad Trump message is anti-trade and anti-globalisation [and to] bring back manufacturing jobs to the USA. This has contributed to a significant fall in Asian currencies," Amplifying Global FX Capital director Greg Gibbs said.
Currencies through Asia have moved sharply lower since the election, the biggest three-day fall in eight years, including the Chinese offshore traded yuan, the Korean won, Taiwan dollar, Malaysian ringgit, Indian rupee and Singapore dollar.
The sharp moves have led some central banks in the region to publicly quell concerns, including the Monetary Authority of Singapore which on Friday said it was prepared to intervene to curb currency volatility.
Currencies hit
Latin American currencies including the Mexico peso were also hit with the threat that a Trump administration would build a wall across the border between the two nations, make changes to the North American Free Trade Agreement and crack down on illegal immigrants. The US accounts for 80 per cent of Mexico's exports, Mr Gibbs said.
"However, one may wonder if the fall in MXN [Mexican peso] has gone far enough as the realities of messing with NAFTA and the downside of routing out a long tradition of hard working productive immigrants while stoking social unrest lead to an inevitable softening of the hardline campaign message," he said.
National Australia Bank currency strategist Rodrigo Catril said rising US bond yields were also weighing on the currencies, because they were taking some of the shine off the yields of so-called carry trades, including the higher yielding EM currencies.
"Emerging markets have definitely been more affected by the US Treasury yields than [trade]," Mr Catril said.
US 10-year yields have risen from 1.7215 per cent on November 9 to 2.192 per cent on Monday.
"The repricing of US Treasury yields moving higher effectively means that from a relative value perspective, the relative yield you get from the carry trades has been diminished," he said.
Emerging markets
EM currencies had been holding up until the election despite long-dated bonds rising since October with the sell-off reflecting the rise in Trump-election-driven volatility, Mr Catril said. "The pick up in carry is a function of how volatility is behaving. An increase in volatility means it's less attractive," he said.
The Australian dollar, often used as a proxy for EM currencies, had held up due to higher commodity prices and the improvement in risk sentiment in the sharemarket, Mr Catril said. EM equity markets had fallen with its currencies, with the MSCI Emerging Market Index falling 5.7 per cent since the election result.
The Australian dollar traded as low as US75.25¢ on Monday, its lowest point in a month, however it was being supported within the US74¢ to US77¢ trading range, he said.
Mr Trump and his team have yet to expand on his trade plans since the election, and Mr Catril said this would translate to a lift in volatility until the policies became clearer.
"The problem at the moment, and what we've seen so far with what Trump has said with other policies, is his bark looks more aggressive than his bite," he said.