Yellen Dovishness Sends Emerging Market Currencies, Philippine Peso Soaring!

When central banks go on a panic mode, like Pavlov's dogs, casino gamblers take this as a cue, or as conditioned stimulus, to engage in manic bidding. 

Last night, US Fed chair Janet Yellen went on a near full dove during her speech. The result has been to fuel a manic risk ON landscape. 

Yet Yellen's dovishness essentially was a grace on emerging market currencies.

From Bloomberg

It’s been at least 18 years since emerging-market currencies had it this good as the Federal Reserve adopted a gradual approach to its rate-increase cycle, fueling optimism capital inflows can be sustained.

A Bloomberg gauge of 20 currencies gained for a fourth day after Fed Chair Janet Yellen said policy makers would act “cautiously” as they look to raise rates. Stocks rallied, sending shares in Shanghai up the most in a month, while South African equities rebounded from a two-week low and Russia snapped the longest run of losses since 2011. The premium investors demand to hold emerging-market debt dropped from the highest since March 16.

“Yellen’s comments were pretty aggressive and make it clear that rate hike expectations might as well be scratched out for this year,” said Nathan Griffiths, a senior emerging-market equities manager who helps oversee $1.1 billion at NN Investment Partners in The Hague. “This is the perfect backdrop for emerging markets to continue” the rally because positioning remains geared to a rising dollar, he said.

Brazil, South Africa, Russia and Turkey will probably benefit most from a weaker dollar, Griffiths said...

The gauge of 20 developing-nation currencies rose 0.4 percent, the most in since March 17, as of 11:18 a.m. in London. That extended the advance in March to 5.3 percent, heading for the best month since 1998.

Malaysia’s ringgit, the South Korean won topped the daily moves on Wednesday, strengthening 1.6 percent and 1.1 percent each. EPFR Global data showed $2.9 billion flowed into stocks in developing countries in the week to March 23 alone, the most since July. That’s supported strength in exchange rates, with all of the 24 associated currencies appreciating in March.

The ruble strengthened 0.9 percent on Wednesday, taking its gain in March to 11 percent, the most among emerging markets, as Brent crude rallied 10 percent to just shy of $40 a barrel, up from a 12-year low of about $27 reached in January and helping a Bloomberg index of raw materials to its first monthly gain in nine. Brazil’s real, the second-best performer, is up 10 percent this month.

The Philippine peso joined the party as the USD-Php fell by .7% today to 46.03 

Yellen's dovishness seem to dovetail with the implied "Shanghai Accord" that may have possibly been forged by global finance and monetary authorities during the latest G-20 meeting. 

And since the Shanghai Accord, the risk ON landscape has bolstered the JP Morgan Bloomberg Asian dollar index (ADXY) by more than 3% since the January meltdown.

The short of this has been that risk ON environment totally depends on sustained actions and guarantees by central banks. It is a question of how long can central bank magic last?