However, over the past year, a different dynamic has taken place: the Fed's tightening cycle and ongoing rate hikes have resulted in a sharp drain of USD-liquidity across the globe.

Meanwhile, with the ECB set to end its QE and the BOJ taking tentative steps toward tightening while engaging in a shadow taper of its own QE, central bank balance sheets are set to shrink for the first time since the financial crisis.

It is this tightening in financial conditions in general, and dollar liquidity in particular that ultimately has been the catalyst that led to a near record divergence in FX volatility between emerging markets and developed nations, incidentally that last time we saw such deltas was just after 9/11 and the great financial crisis.While leads us to the bigger problem: as the dollar becomes more attractive and as carry trades collapse, emerging markets are forced to respond to currency weakness with interest rate hikes to stem capital outflows.