Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Emerging Market Currencies On Track For 'Brutal' Second Quarter

By (Noreen Burke/ 10, 2018 09:34
Emerging Market Currencies On Track For 'Brutal' Second Quarter
By (Noreen Burke/   |  May 10, 2018 09:34
Saved. See Saved Items.
This article has already been saved in your Saved Items
  • Higher US rates and strong dollar catalyst for losses
  • Argentine peso and Russian ruble face heaviest rout
  • Turkish lira follows closely behind

Emerging market currencies have fallen sharply against the US dollar so far in the second quarter, leaving the asset class on track for a brutal run this quarter, according to the head of currencies strategy at ING. ”Broad dollar strength has delivered a brutal second quarter for EM so far,” said Chris Turner, currencies strategy head at ING in a note this week.

USD Performance vs TRY, ARS, RUB
USD Performance vs TRY, ARS, RUB

The Argentine peso has experienced the worst selloff to date, tumbling 11.29% against the US dollar so far this quarter. Russia’s ruble has dropped 10.6% against the US dollar.

The Turkish lira has shed 7.75%, the Mexican peso has declined 7.17%. Chile’s peso is off 5.88%, the Polish zloty has fallen 4.85%, the South African rand has lost 5.68% and the Brazilian real is around 7.9% lower.

The ruble has been pressured lower by a new round of US sanctions imposed in April targeting some of Russia’s biggest tycoons, in response to alleged Russian meddling in the 2016 US presidential election.

Argentina’s central bank raised interest rates for the third time in eight days last Friday in a bid to stem spiraling inflation and prop up the peso. Since then the country has been forced to seek assistance from the International Monetary Fund.

Meanwhile, the Turkish lira has also been hit by accelerating inflation and investor skepticism over central bank policy. “While we can blame all these moves on local (largely political) stories, it has been higher US rates and the strong dollar which has been the catalyst for losses,” said Turner.

The US Dollar Index hit its highest levels of the year this week, while US 10-year yields rose above the key 3% level for the first time in four years late last month. That has placed pressure on emerging markets by pushing currencies lower and bond yields higher.

Dollar strength, rising US yields “a paradigm shift”

A surging dollar is likely to hit foreign investment into emerging markets this year, the Institute of International Finance said on Wednesday, calling the dollar's rise and higher US yields "a paradigm shift" for investors.

"Prospects for non-resident capital inflows to emerging markets this year have deteriorated...Rising US bond yields and a stronger dollar have prompted a 'sudden stop' in portfolio flows since mid-April," the IIF said in a report.

The Federal Reserve has raised interest rates six times since 2015 and has projected two more rate hikes this year, but some investors expect three more. Emerging market economies with high current-account deficits, a heavy dollar debt load and runaway inflation remain vulnerable to rising global interest rates.

Fed Chairman Jay Powell said earlier this week that emerging market economies should be able to manage as advanced economies move toward tighter monetary policy. He said that many have bolstered their defenses after previous crises, but he did point out that some investors and institutions may not be well positioned for a rise in interest rates, even one that markets broadly anticipate.

Emerging Market Currencies On Track For 'Brutal' Second Quarter

Related Articles

Dmitriy Gurkovskiy
Euro Recouped Its Losses By Dmitriy Gurkovskiy - Jul 12, 2021

The major currency pair is rather neutral early in the week but the Euro remains quite confident against the USD. Improved risk attitude made the “greenback” fall earlier and the...

Emerging Market Currencies On Track For 'Brutal' Second Quarter

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email