Emerging market currencies have been under fire in recent weeks, and with the impending U.S. sanctions against Iran, U.S. President Donald Trump may have just turned up the heat. Until recently, emerging market currencies had been enjoying a two-year rally. All this started changing in mid-April, when traders began dumping emerging market currencies steadily. According to reports published by Bloomberg, emerging market bonds dropped for the second consecutive week, the first two-week decline since November 2016.

Putting pressure on emerging market assets it the high U.S. dollar and high U.S. bond yields which have enticed traders to take another look at the U.S. currency. Concerns about a brewing trade war between the U.S. and China has also weighed on emerging markets, as has a new awareness about President Trump's protectionist policies which could take both jobs and investment opportunities out of emerging markets. Finally, internal economic struggles and uncertain central bank policies in critical regions, especially in Turkey and Argentina has made traders reconsider their interest in emerging markets in recent weeks. The Turkish lira is down 11 percent this year and the Argentine peso has plummeted 17 percent. Latin American currencies have also been depreciating lately, albeit at a slower rate. MSCI's benchmark for emerging market currencies is down more than 10 percent since January 2018. JPMorgan's emerging market global bond index is down around 7 percent. As reported by CNBC, economists at Societe Generale are not yet troubled by these mild depreciations.

Still, despite these challenges, Federal Reserve Chair Jerome Powell said on Tuesday that he thinks emerging markets currencies are well-positioned to deal with the turbulence ahead. Nick Watson, multi-asset manager at Janus Henderson agrees, and said in an interview earlier this week that emerging markets are attractively valued and under-owned.