Geoff Yu, senior market strategist, BNY
Emerging market FX enters 2026 with a constructive backdrop. I see three forces tilting the balance toward appreciation rather than a simple weak-dollar trade. First, local-currency bonds stand to benefit if the US easing cycle extends.
Historically, lower US rates compress EM funding costs and support duration, particularly in Latin America, reinforcing the carry-and-currency proposition. That said, event risks are real: Brazil’s presidential election, the USMCA review kick-off, and US midterms will likely generate periodic volatility.
Second, flows are improving as EM sovereigns and reserve managers diversify fixed-income exposures away from traditional safe havens. With growth projections resilient and many EM central banks retaining policy room to manoeuvre, EM debt looks sustainable. Policy flexibility is a key differentiator if momentum cools.
Third, moving away from the dollar and US assets has happened on the margins this year and will undoubtedly be a long-term theme. Talk will pick-up upon further trade tensions, but we doubt there will be aggressive moves by any external investors in that regard.
Meanwhile, countries will continue to look at new payment and settlement systems, relying on new technology, but fully cognisant of the fact that the US is also moving forward with financial innovation.
Taken together, 2026 reads as an EM strength narrative. Our iFlow data continue to show relative under-weighting of EM positions across all assets, which will help generate momentum for diversification next year.
Charles Mangin, head of FX trading, Crown Agents Bank
Next year should be a continuation of 2025 with broad emerging market strength. The further interest cuts expected in the US and other major countries should be beneficial, as they may provide the much-needed breathing space lacking in high-rate environments.
With lower inflation pressure, lower international rates and a dollar on the back foot, we should continue to see investment funds diversify into the Global South, which in turn will help strengthen their currencies.
A number of key economies have undertaken positive policy developments over the last year, which will hopefully allow them to benefit from these potentially easier times and generate sustainable growth.
We might highlight the Ghanian cedi’s 30% appreciation against the dollar this year, alongside inflation in Ghana reaching lows not seen for many years, as an increasing sign of Global South policymakers achieving real positive impacts on their markets.
Dan Burke, global head of emerging markets, MarketAxess
Between 2017 and 2024, outstanding emerging market debt has doubled from $20 trillion to $40 trillion. Over 90% of this increase has been driven by local currency bond issuance from companies and governments to support growth initiatives and infrastructure development.
We expect this growth to continue in 2026, following strong investor appetite for this asset class in 2025 as emerging markets benefited from a more supportive macro backdrop.
What has been particularly exciting is that this growth in EM debt has come hand-in-hand with growth in electronic trading, both in local and hard currency bonds. Investors are increasingly looking to electronic platforms for trading and data solutions, especially for larger size transactions.
It’s clear that the spotlight will remain on emerging market bonds in 2026, with the expansion of JP Morgan’s GBI-EM index to additional emerging economies expected, along with Korea’s addition to the FTSE WGBI index.
We expect to see more growth in electronic trading as investors look to execute transparently, efficiently and competitively.