Emerging Market currencies from A to Z are under pressure again as the Argentine peso fell after President Macri asked the IMF for an earlier-than-scheduled disbursement of a USD 50bn credit line, notes the research team at Rabobank.
Key Quotes
“The Argentine President had hoped to reassure markets that the country will have enough cash at hand, but had quite the opposite effect. Investors saw the move as a desperate attempt, as the government is still struggling to put the public finances in order.”
“The result was a sharp selloff in the currency: ARS depreciated by 7.5% after the President’s speech. The IMF has said it will consider the countries’ request, although this may not take away investor’s fundamental concerns.”
“The Turkish lira hasn’t returned from holiday in a much better mood either. After a 4-day public holiday last week, the TRY has resumed its slide this week. While the decline is not as rapid as we have witnessed in earlier episodes, continued denial by Turkish officials isn’t helping.”
“The finance minister stands by his view that the Turkish economy is strong, even though economic data continues to point to a growth slowdown. Economic confidence declined to 83.9 in August, down from 92.2 in July and the lowest score since 2009.”
“President Erdogan has maintained his combative tone, telling the Anadolunewswire that Turkey “won’t back down with threats” and that “everyone will see that Turkey has alternatives”. Whether that refers to help from Germany remains to be seen, though. Indeed, one could also ask whether Germany is willing to extend support if Turkey maintains its stance. USDTRY rose to 6.54 this morning, extending the depreciation of the lira.”
“Yet the risk-off sentiment is not contained to just the currencies with domestic issues. Amidst the global environment, most emerging market currencies are on the back foot against the US dollar.”
“USD/CNH is gradually marching towards 6.85 again, and ZAR has been sliding too. Adding all emerging market currencies from A to Z, the losses currently stand at -1.77% month-to-date, as measured by the MSCI Emerging Markets FX index.”
Share
