emerging market currency crisis could lead to broader economic trouble
Last Updated : GMT 19:07:01
Arab Today, arab today
Arab Today, arab today
Last Updated : GMT 19:07:01
Arab Today, arab today

Emerging market currency crisis could lead to broader economic trouble

Arab Today, arab today

Arab Today, arab today Emerging market currency crisis could lead to broader economic trouble

Emerging market currency crisis.
Dubai - Arab Today

Emerging market investors are trying to gauge whether a currency crisis and the steep interest rate hikes being used to fight it could turn into a broader slowdown and even recession.

On Thursday, Turkey's central bank attempted to draw a line under a lira collapse of almost 40 percent this year by hiking interest rates more than 6 percentage points to 24 per cent.

Argentina is struggling to shore up its peso, which has more than halved in value despite punitive interest rate rises to 60 per cent.

Other currencies have been caught in the slipstream, with India's rupee plumbing record lows and South Africa's rand, Russia's rouble and Brazil's real losing 15-20 percent this year so far.

Signs are appearing that months of market turmoil are starting to take the toll on real economies. South Africa unexpectedly entered recession in the second quarter of this year, Argentina is predicted to follow suit and Turkey is now widely forecast to experience a hard landing over the next year.

So what is growth like in these countries right now, what signs are there of a shock to business and consumer confidence and has the near sudden stop in investment flows seen 2019 economic forecasts deteriorate markedly?

Business confidence

Purchasing manager indexes have suffered sharp drops across many developing nations, according to data earlier in the month.

"When you have an environment where (the) US dollar is strengthening and US front-end rates are going up that tightens external financial conditions for emerging markets, especially for the deficit economies," said Murat Ulgen, global head of emerging markets research at HSBC.

Domestic financial conditions

Meanwhile faced with capital outflows, many emerging market policy makers have opted to hike rates, thereby also tightening domestic financial conditions, Ulgen added.

"Given that markets have been volatile, generally speaking, and rates have been higher and equity markets have been lower in summer months ... it is highly likely that financial conditions are still staying in the negative territory," he said.

Having tumbled some 22 per cent from their January peaks, emerging equity markets are in territory commonly regarded as a bear market, is often considered to be self-sustaining decline.

"Tighter financial conditions are going to weigh on economic activity going forward," predicted Ulgen.

History of sudden stops

Emerging markets are familiar with such crises.

The Institute of International Finance found nine episodes since 1980 where when real exchange rates fell 30 percent or more, the devaluation was sustained for at least three years and the decline did not reverse a previous overvaluation.

Mexico suffered such a fate in 1995, Indonesia and Russia in 1998 and Brazil a year later. Meanwhile Argentina and Uruguay recorded such declines in 2002, Egypt in 2003 and 2016 and Ukraine in 2014.

 

arabstoday
arabstoday

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

emerging market currency crisis could lead to broader economic trouble emerging market currency crisis could lead to broader economic trouble

 



Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

emerging market currency crisis could lead to broader economic trouble emerging market currency crisis could lead to broader economic trouble

 



Arab Today, arab today Modern colorful bedroom renovation

GMT 11:23 2017 Thursday ,21 December

Modern colorful bedroom renovation
Arab Today, arab today For the Variety of Interior Design Styles

GMT 11:14 2017 Tuesday ,19 December

For the Variety of Interior Design Styles

GMT 15:00 2017 Sunday ,19 February

Hana El Zahed tells her career's story

GMT 16:06 2017 Sunday ,30 July

Lara Tamash warns of social media's impact

GMT 16:09 2017 Tuesday ,19 September

CBS's Australia TV deal favoured over Murdoch bid

GMT 01:11 2017 Wednesday ,20 December

Deputy King receives Nepalese ambassador

GMT 13:28 2017 Friday ,31 March

Bershka launches debut make-up collection

GMT 01:26 2017 Saturday ,18 November

Reports underline proliferation of weapons

GMT 13:36 2017 Thursday ,13 April

Khaled El Sawy reveals his new movie details

GMT 09:07 2013 Tuesday ,17 September

Egyptian opera singer Ratiba El-Hefny passes away

GMT 07:29 2017 Tuesday ,14 November

Gulf, Aerospace Enterprise sign agreement

GMT 12:44 2017 Sunday ,04 June

Hassan Hallak reveals Lebanese Ramadan habits

GMT 11:49 2014 Thursday ,11 December

Sanam Puri to Perform at Global Village

GMT 14:52 2017 Wednesday ,29 November

Societe Generale shares climb after cost-cutting plan

GMT 13:15 2017 Monday ,27 November

Shanghai police see no foul play

GMT 08:07 2017 Sunday ,29 October

Test drive: The Rolls-Royce Phantom VIII

GMT 23:32 2015 Wednesday ,14 January

Kuwaiti crown prince receives Sheikha Suad al-Sabah

GMT 09:16 2018 Monday ,15 January

Protests mark Tunisia uprising anniversary

GMT 08:32 2018 Saturday ,13 January

Tunisia protesters give government yellow card
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday