Most Middle East and North Africa currencies faced net selling in May as rising US rate expectations and inflation concerns weighed on frontier markets.
Middle East and North Africa currencies came under pressure in May as carry trade unwinds and rising US rate expectations triggered net selling across the region. Only the Jordanian Dinar saw modest net buying, while fixed income assets also underperformed, reversing a brief respite in April.
The sell-off reflects broader struggles in frontier markets, driven by higher global inflation expectations and geopolitical tensions. Capital inflows into Gulf economies and Egypt may slow further if US dollar cash yields continue to rise, reducing the appeal of regional assets.
Energy price volatility failed to provide a buffer, and the narrative of regional safe havens like the Omani Rial weakened amid shifting geopolitical dynamics. Market participants cited sustained carry trade unwinding as a key factor in the downturn.