Emerging markets currencies faced further selling last week on the heels of the worst week in more than a year, with a resurgent dollar and a slew of local issues sparking jitters among investors.
The Turkish lira faced the largest falls, sliding 0.85 percent on the buck, with a dollar buying 4.2624 lira. South Africa’s rand was the second biggest faller, down 0.44 percent on the greenback, while the Philippine peso, Russian ruble and Indian rupee were each off roughly 0.4 percent.
Whilst trading in the Argentine peso which tumbled 6.2 percent last week and provoked a sequence of three rate rises from the central bank.
US Treasury yields have moved higher over the past month, with a vigorous economy expected to prompt the Federal Reserve to increase interest rates three to four times this year. In fact, the 10-year climbed from 2.73 percent at the start of April to above 3 percent by April 25.
Higher yields will, accordingly, take some polish off of the carry trade, in which investors borrow in lower-yielding countries to buy debt in higher-yielding ones.
The trade has been a boon for the demand of EM currencies, whilst several EMs have also suffered from idiosyncratic issues. Argentina is facing a crisis of confidence, with investors worried that even after the central bank hiked borrowing costs from 27.25 to 40 percent just seven days it may not stop rapid inflation.
Written by Scherzando Karasu, External Financial Journalist DISCLAIMER:All financial products traded on margin carry a high degree of risk to your capital. ActivTrades PLC is authorised and regulated by the Financial Conduct Authority, registration number 434413 The thoughts and opinions expressed here are solely those of the writer, and do not necessarily reflect the view of ActivTrades PLC. This commentary is for information purposes only and should not be considered as investment advice. Any forecasts given are not a reliable indicator of future performance and the decision to act on any ideas and suggestions presented is at the sole discretion of the reader.