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Weekly Comic: Ongoing Emerging Market FX Crisis Spark Contagion Fears

Published 09/06/2018, 09:23 AM
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Investing.com - Markets kept a wary eye on wobbly emerging market currencies this week, with declines in the Turkish lira, Argentine peso, and the South African rand at the forefront.

The turmoil spilled over to a few other emerging countries, most notably Brazil, Indonesia and India, which all saw their respective currency slide lower against the dollar.

Emerging market currencies have been hard hit by concerns that higher U.S. interest rates will pressure countries that have borrowed heavily in dollars in recent years.

The slump in commodity prices and fears of a prolonged Chinese slowdown as a result of a U.S.-Sino trade war also kept the pressure on these economies.

The Turkish lira has lost about 40% of its value this year, largely due to President Erdogan's unfriendly policies.

Argentina's peso, which slumped to a record low this week, has fallen by more than 50% this year, as the country’s government scrambled to deal with a fresh economic crisis.

South Africa’s rand dropped to levels not seen in more than two years after data showed that the country's economy fell into a recession.

India's rupee also fell to an all-time low against the greenback, while Indonesia’s rupiah sank to the lowest in two decades even after the central bank intensified its fight to protect it.

With the Fed poised to raise rates later this month, analysts warned that the blood-letting may not be over for emerging market currencies.

To see more of Investing.com’s weekly comics, visit: http://www.investing.com/analysis/comics

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