The emerging asset class’s latest woes came from Argentina, where the peso tumbled to a record low, prompting policy makers to boost a benchmark interest rate to 60 per cent. In Turkey, a report that the central bank’s deputy governor was set to resign, sank the lira.
“Argentina’s problems will probably keep investors’ focus on emerging markets
with weaker fundamentals, leading to sell-offs in those countries like we’ve seen in Turkey,” said Koji Fukaya, chief executive officer at FPG Securities in Tokyo.
“Argentine assets are unlikely to see a turnaround soon with just the IMF support because there hasn’t been any fundamental improvements in the country.”
The latest currency crisis in Argentina
adds to existing headwinds for emerging markets
including the end of an era of cheap money, prospects of a global trade war, American sanctions and deep political uncertainties in places such as Brazil.
The rupiah fell to 14,750 per dollar, the weakest level since the 1998 Asian financial crisis, while the Indian currency slid past an unprecedented 71 against the dollar.
Asia needs to “guard against complacency” especially for those with deficits in their fiscal and current-account balances, strategists including Philip Wee at DBS Group Holdings Ltd. wrote in a note. “With heightened trade tensions threatening to erupt into a full-blown trade war, the region is on alert for disorderly capital outflows.”
South Africa’s rand added 0.3 percent, trimming its monthly drop of more than 9 percent. Turkey’s lira snapped four days of losses after the government raised taxes on dollar deposits of up to a year and scrapped a 10 percent tax on lira accounts with maturities longer than a year.