HSBC - " Currencies are moving increasingly in sync with each other, signalling a return of the RORO phenomenon in which a common factor causes all markets. to move together. This has begun to reverse the trend earlier in the year when RORO loosened its grip on the FX market. Talk of tapering off (TOTO) in the US is now fostering a collective fear among those currencies reliant on foreign funding for their current account deficits. However, two caveats are worth noting. Firstly, this growing synchronisation is confined to emerging market FX, with G10 currencies still trading largely independent of each other. They offer you the luxury of being able to trade them without being buffeted by that common factor. Secondly, even within EM, the currencies may be moving in similar directions, but the strongest correlations are confined to those currencies most under stress.
So while RORO is making a comeback in FX, there is still scope to capitalise on local differentiating factors."