Embarrassing trio in emerging markets face fear of spike in yield
(Bloomberg) – Eight years ago, when taper tantrum rocked emerging markets, the so-called Fragile Five of Turkey, Brazil, South Africa, India and Indonesia suffered the most. Another spike in U.S. Treasury yields threatens to wreak havoc in at least three of these countries: the Turkish lira, the Brazilian real and the South African rand last week drove major global declines in the world’s worst currency selling. developing countries since the end of September. These exchange rates have the highest one-week implied volatility in the world, with some analysts warning against more “Higher US interest rates leave all emerging countries vulnerable,” said Robin Brooks, chief economist at the Institute of International Finance in Washington. This is particularly the case for “large current account deficit countries like Turkey and places where fiscal expansion in 2020 causes markets to question financing needs in 2021. The latter affects Brazil and Africa. from the South, ”he said. last week at the highest more year, which has led traders to voice their expectations on when the Federal Reserve will tighten its policy. For now, officials stress that the central bank has no plans to raise interest rates due to continued weakness in the labor market. That will make comments from Fed Chairman Jerome Powell on Thursday at a Wall Street Journal event every more interesting.In the developing world, …
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