The Brown Brothers Harriman team expects soft commodity prices and the upcoming turn in US interest rates to keep the EM currencies pressurised through H1 2015. EM currencies have stabilized after the FOMC meeting last week. Yet the Fed clearly signaled that it remains on track to start hiking rates around mid-2015. While Yellen’s guidance was taken as dovish (tightening won’t be at a predictable, “measured” pace), we still feel the looming Fed tightening cycle remains negative for EM. Furthermore, commodity prices remain soft. This and the upcoming turn in the US interest rate cycle should maintain downward pressure on EM currencies through H1 2015. Greater differentiation amongst EM FX is being seen, and this trend should continue in 2015. “The standard deviation of FX changes in 2014 YTD has moved close to 10%, the highest since 2009.” “This supports our view that fundamentals will remain a major factor for currency under- and out-performance in the current market conditions. Equity market returns across EM are showing a similar divergence trend, the greatest since 2009 as well.”