Countries at risk if Turkey’s lira crisis becomes EM debt crisis

Pedestrians
walk past an electronic board showing currency exchange rates in
Buenos Aires’ financial district, Argentina, June 29, 2018.
REUTERS/Agustin Marcarian

Pedestrians
walk past an electronic board showing currency exchange rates in
Buenos Aires’ financial district, Argentina, June 29, 2018.
REUTERS/Agustin Marcarian

• The collapse of the Turkish lira and the strong dollar
  have hit emerging market currencies globally.
• If the trend continues, countries may start to have
  trouble paying back dollar-denominated debts.
• Analysts say Argentina, Pakistan, South Africa, and
  Colombia are among those most at risk.

LONDON —
The collapse of the Turkish lira against the dollar is the
focus of global markets but emerging market currencies are
getting hammered across the board and there are concerns that the
issue could spiral from a currency crisis into a debt crisis.

The Indian rupee hit an all-time low against the dollar
overnight, the South African rand has been diving,
Argentina’s
central bank hiked rates by 5% on Monday to arrest the peso’s
decline, and
Indonesia’s government is meeting to discuss emergency measures
to defend the sinking rupiah.

“EM [emerging market] currencies (judged by the Bloomberg EM
currency basket) are now at their lowest nominal value in the
past three years – below the level reached in early 2016 at the
time of the commodity price fall and period of US$ strength,”
analysts Stuart Culverhouse and Hasnain Malik from emerging
market specialist bank Exotix said in a note on Tuesday. …

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