A money changer counts U.S. dollar banknotes at a currency exchange office in Diyarbakir, Turkey May 23, 2018. REUTERS/Sertac Kayar
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For all the concern that there's a crisis brewing in some developing economies, emerging markets showed resilience going into the final week of May, thanks to the dollar's recent pause and a drop in U.S. yields.But Turkey apart, investors are saluting a week in which emerging-market currencies had their biggest gain since March and local-currency bonds strengthened for the first time in seven weeks as U.S. 10-year yields slipped back below 3 percent.Investors will also closely watch how central banks will respond to any return of currency weakness.The lira was the world's best-performing currency Monday after Turkey's central bank announced changes that sought to simplify its monetary policy.It said it would start using the one-week repo, which hadn't been used as its main funding tool since January 2017, as its policy rate starting June.The central bank's unscheduled 300-basis point increase to its main rate – the late-liquidity window – last week had failed to support the currency for long.
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