As reported by Bloomberg, Allianz SE’s chief economic advisor Mohamed El-Erian has noted that Brazil is likely to be the next Emerging Market (EM) ‘domino’ to fall as contagion continues to spread.
Key quotes
“Brazilian policymakers are in a “tricky position — and there’s little room for error,” El-Erian.. wrote on Twitter.
The central bank’s intervention followed similar actions by central bankers in Argentina, Turkey, India and Indonesia. While India and Indonesia have curbed some of their losses, currencies in Argentina, Turkey and now Brazil remain in precarious positions with world-leading selloffs this year.
This isn’t El-Erian’s first warning for the asset class. Last month, he echoed caution from Harvard economist Carmen Reinhart that risks were climbing.
“Higher oil prices + rising interest rates + appreciating dollar, the trifecta that continues in #markets today (albeit not in an extreme fashion), tends to test the ‘self insurance’ of several #EMergingMarkets, together with their economic policy responsiveness,” he said.”
Share
