By Mike Obel - The values of most currencies in the so-called frontier markets, which include Ukraine, Kazakhstan and Nigeria, are "significantly overvalued," Bank of America Merrill Lynch said Tuesday.
"In contrast to EMFX (emerging market foreign exchange), which is largely floating and has adjusted a lot, most of the frontier FX still is pegged and thus at risk of disorderly devaluations," the bank said in a report. "Indeed, while EMFX is now around fair value and strains seem to be easing, lately shoes have started to drop in frontier: Ghana, Kazakhstan, Nigeria, Ukraine -- to name a few.
The biggest overvaluation exists in Mozambique, Uganda, Tanzania and Rwanda, which run current account deficits of 12 percent to 40 percent of gross domestic product, the bank said.