- Managing Emerging Markets risk was identified as a priority by 54% of respondents in a survey of over 400 FX professionals.
- Interest in Emerging Markets (EM) FX is driven by an increasingly global outlook, several EM currencies outperforming the G10 currencies, increasing automation and improving market transparency.
- EMFX is expected to continue growing, driven by electronic trading, improved market data and the increased adoption of trading algorithms.
LSEG FX recently published the second research report in a two-part series, FX Priorities for 2025. By examining the focus areas cited by FX trading firms, this research allows market participants to benchmark themselves against broader market trends and identify solutions available to drive growth and remain competitive.
The report showed that 54% of respondents saw managing EMFX as one of their highest priorities. The importance of EMFX is driven by an increasingly global outlook, several EM currencies outperforming G10, increasing automation, and improving market transparency.
Why are firms prioritising EMFX now?
Globalisation is one of the drivers for EMFX becoming increasingly important. The need to trade EMFX has increased as firms have bought and sold goods globally or traded other asset classes around the world.
The market is looking for alpha in Emerging Markets, and that's the result of stagnant developed markets. Asset Managers are looking to see where they can invest, and certain currencies like the Mexican Peso and Brazilian Real have outperformed Western currencies. The dollar has weakened, and Asset Managers are looking to see where carry trades can help to improve returns.
Albert Blackburn
Albert Blackburn added, “Firms prioritising EMFX is not a surprise. For many years the market has been US Dollar minded, but this trend is ebbing away with all the events happening in 2025. This is leading to emerging market currencies being more attractive. It's not just China - it could be India or Indonesia for example, driven by global trade. In addition, there is a political element to firms prioritising certain EM currencies, as a lot of these economies are becoming more open.”
As G10 currencies, and particularly the US Dollar, have largely stagnated in recent years firms are looking to Emerging Markets to find value.
He said, “The market is looking for alpha in emerging markets, and that's the result of stagnant developed markets. Asset Managers are looking to see where they can invest, and certain currencies like the Mexican Peso and Brazilian Real have outperformed Western currencies. The dollar has weakened, and Asset Managers are looking to see where carry trades can help to improve returns.”
The impact of tariffs
During 2025 there has been a lot of talk about tariffs, which are driving change in the global economy and impacting trading strategies.
Albert Blackburn explained, “With tariffs in play, firms have to look to new markets, for example, the South African Rand is one of the best performing currencies. There's an inflow of currency movement into these markets and investment in equities which was seen as quite expensive in the past.”
He added, “Mexico's corporates seem to be doing very well working with markets such as Germany. And the rest of the world is evolving to manage supply chains and FX hedging strategies. This is why there is an interest in EMFX.”
Looking to the future
Given the evolution of global FX markets and supply chains it is highly likely that trading firms will continue to prioritise EMFX and that technology will play a key role in this.
Alex Goraieb, Head of FX Data, Analytics and Pre-trade Workflows at LSEG FX explained, “I know we have brought some emerging markets into the electronic world that used to be traded by phone only two or three years ago. But the market is still opaque. It's still hard to engage. It's still not fully electronic. So, a key focus is to get this darker part of EMFX to work better. The challenge is to create better access to EMFX markets, better market data, more transparency, better relationships that can handle specialist liquidity, and better channels to market. And then to complement this with the more traditional electronic trading styles.”
Bart Joris added, “One size does not fit all. There is a lot of political influence as well in the way people trade, which comes from the openness of a country and the way it manages its currency. Each country will evolve at its own pace, but the way that countries and currencies open up will be the same for all. Countries and their currencies are just at different stages of their journey.”
The adoption of trading algorithms will also help to drive the evolution of EMFX, in much the same way it did for G10 currencies. As market transparency and the availability of data improve it is expected that algorithms will be deployed in EMFX and further improve efficiency and returns.
Some of the greatest value is in the less liquid currencies. We are seeing algo providers working hard to deliver solutions in EMFX and that will only continue to drive the creation of new dynamic algos, which look at EMFX market environments and the market dynamics at any given moment in time. This is only going to increase with the use of AI.
Romael Karam
The quotes in this article are from an interview conducted in July 2025.
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