Well, what goes up must come down, which also means that what goes down must come up we suppose, which is why once again, the previously hapless ringgit and rupiah are heavily bid. 

The two currencies have of course been caught up in the global EM turmoil, but as we documented extensively on Wednesday, the tide has turned a bit this week. 

When things are going especially poorly, sometimes all it takes is the slightest glimmer of hope to ignite a rally, and between a poor NFP report in the US (and yes, EM FX is clearly one place where bad news in the US economy is most definitely good news as it forestalls an FOMC liftoff), “better” than expected trade data in Malaysia, a deceptively low read on capital outflows from China, and dovish FOMC minutes, this week has brought several such glimmers and so, everyone has apparently begun backing up the truck on Asia EM optimism.

Here are some highlights from Bloomberg: 

• Indonesia’s rupiah and Malaysia’s ringgit lead Asian currencies higher as Dollar Index holds overnight losses; sovereign bonds drop in Australia, while interest-rate swaps decline in Singapore.
• Rupiah heads for 8.7% gain this week versus dollar; 13,500/dollar is a competitive level for exports and to manage inflation: Bank Indonesia’s Adityaswara; says markets have responded positively to policies that have sought to add FX supply onshore and to government’s commitment to structural reform
• Rupiah move due to external and domestic factors, such as Fed minutes and confidence in govt’s structural reforms, Senior Deputy Governor Mirza Adityaswara tells reporters in Jakarta.
• Significant move in rupiah means many market players cut losses
• Bank Indonesia sees Fed delaying rate rise to after 1Q 2016
• Rupiah surges 3.4%, most since 2008, to 13,428 per dollar, taking weekly rally to 9.1%, biggest since July 2001, according to prices from local banks compiled by Bloomberg.
• Central bank continues to intervene in market: BI Senior Deputy Governor Adityaswara; says 13,500/dollar is competitive level for exports and to manage inflation
• BI sees inflation at 4.1%-4.3% at year-end
• MOF scraps import tax for machinery and materials
• Pivot point at 13,828; USD/IDR support at 13,768, 13,656, 13,484 all breached; resistance at 13,940, 14,000, 14,172
• USD/IDR below lower end of Bollinger band at 13,746
• 1-mo. implied volatility jumps 76 bps to 14.7625%; avg for past 12 mos. is 10.9534%
• Rupiah 1-mo. forwards climb 3.9%, biggest gain since 2008, to 13,541 per dollar
• BI stepped up USD selling intervention in Sept. as IDR came under pressure, BNP Paribas says in note today; recent stabilization suggests some relief on FX reserves in Oct.; central bank’s net short forward liabilities likely to rise however as it widens scope of FX intervention
• Global investors bought net $49.7m in local stocks yesterday: exchange data
• Yield on 8.375% govt bond due Sept. 2026 slides 12 bps to 8.709%: IDMA data

So that's Indonesia. Here's the good news on Malaysia:

• Ringgit rises 2.9% to 4.1147 per dollar for weekly gain of 6.8%, most since 1998, according to onshore prices.
• Pivot point at 4.2321; USD/MYR breaks support at 4.1944 and 4.1531, next at 4.0741; resistance at 4.2734, 4.3111, 4.3901
• USD/MYR falls below cloud top on ichimoku chart
• 1-mo. implied volatility surges 231 bps to 18.7800%; past yr’s avg is 10.5696%
• 1-mo. forwards climb 2.6% to 4.1021 per dollar
• USD/MYR fell in response to dovish FOMC minutes last night and seems to be heading to next key support at 4.1000, Bank of Tokyo-Mitsubishi UFJ writes in note today; this week’s Aug. trade data another factor propping up MYR
• 1MDB didn’t commit offense regarding central bank probe, attorney general says
• Bank Negara sells MYR2b 364-day notes
• Yield on 3.955% govt bonds due Sept. 2025 falls 3 bps to 4.134%, based on Bursa Malaysia prices
• One-year IRS down 3 bps to 3.8450%; five-year contracts down 6 bps to 4.1750%

And so just like that, crosses that were previously spiraling towards oblivion at the quickest pace in nearly two decades are now rallying at the most dramatic pace in those same two decades. Of course this is what invariably happens when something suffers an outright collapse: the rebound always looks especially good by comparison.

But don't be fooled, the fundamentals here aren't favorable. Sure, there will be relief rallies, but it speaks to just how absurd the entire fiat regime has become when minutes from a central planner meeting that already happened(so despite the fanfare, let's not pretend like no one knew the committee was leaning dovish) are enough to generate huge FX rallies that, all else equal, would suggest there has been some seismic shift in the underlying factors that drive EM assets. Of course we understand all too well that what Janet Yellen says is indeed one these underlying factors, but that doesn't thereby mean that it should be. That is, this should probably be dictated by things like global trade, demand for raw materials exports, overall sentiment, etc. Those things have clearly (and rightfully) contributed to the EM malaise and so when you look at this week's rally the question you have to ask yourself is this: have those fundamentals really changed that much? 

The answer of course, is "no" which is why you may want to fade this one before everyone suddenly remembers what's actually going on.