The seemingly uniform upswing in the Overall and High Yielding indexes masks a wide dispersion of individual currency performances. For example, CZK (+28.6%), PLN (+23.5%), and SKK (+22.7%) demonstrated the strongest gains relative to the USD during the recent period of financial turmoil. This reflects their high correlation with the EUR, as well as positive regional sentiment due to Slovakia’s pre-euro rally and Poland’s new government. Moreover, the region’s central banks proved relatively decisive inflation fighters, given well-established inflation targeting frameworks and relatively robust economic growth. Conversely, KRW (-13.4%), ZAR (-11.0%), and INR (-5.8%) logged the steepest declines against the USD during the same timeframe. ZAR, in particular, is a currency that has suffered from monetary policy being caught between the rock of inflation and the hard place of a rapidly weakening economy.
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