As the Fed's big move to raise interest rates draws to a close, some of the world's top investors expect the dollar to soon fall into a weak trend that has lasted for years。The shift will support emerging markets and push developing country currencies up nearly 9 percent from late October to early February.。But market turmoil triggered by the dollar's rebound this month has deterred some potential buyers。

Fund managers from Abrdn Plc to Fidelity Investments are worried about betting in the wrong direction in the latest round of dollar gains, especially after MSCI's measure of developing country currencies gave back almost all of its gains this year.。

James Athey, investment director at Abrdn's interest rate management in London, said: "We are more concerned that betting on emerging market currencies (EMFX) has gone too far too fast on a tactical level.。"The Fed has not finished raising rates, there is still a lot of uncertainty about the inflation outlook, and we expect the US / global economy to fall into recession in the next six to 12 months."。"

This uncertainty was fully reflected on Friday, when the Fed's favored inflation indicator unexpectedly accelerated, raising the possibility that U.S. interest rates will remain high for a longer period of time and boosting the dollar.。

The decline in the benchmark indicator, which measures the currencies of developing countries, intensified in what would be the worst month since last September.。JPMorgan's measure of risk appetite for emerging market currencies also fell this month, turning negative in mid-February for the first time this year.。

The baht has given back all of its gains from early 2023, after the market was optimistic about the return of Chinese tourists.。The South African rand is often seen as a measure of risk appetite, and the currency is now back to end-2022 levels.。

Investors in Fidelity International are currently buying the dollar against the Philippine peso and the Polish zloty.。

Goldman Sachs, meanwhile, warned of a fight for the South African rand, which is sensitive to US interest rates.。

Some currencies remain resilient

However, the currencies of some developing economies have been able to withstand the recent strength of the dollar。

The Mexican peso and Peruvian Sol bucked the trend in February, driven by the inflation cycle and commodities。

Paul Greer, Fidelity's fund manager in London, said: "Compared to other emerging markets, Latin America appears to be ahead of the curve in terms of inflation and policy tightening cycles.。"This has resulted in very high real yields in the region, supporting the flow of foreign portfolio investment into the local bond and foreign exchange markets."。"

Alvin Tan, head of Asian foreign exchange strategy at RBC Capital Markets, believes that certain Asian currencies are also better able to withstand a period of dollar strength, especially if too tight monetary policy triggers a recession in major economies。

"In my opinion, the won and the baht are still relatively cheap," he said.。"If Asia does manage to avoid a recession this year, then I expect assets and currencies in the region to rise further."。"