Emerging Markets Hit By Low Oil and Strong Dollar

December 8, 2014 Share Print 0

Nothing’s going right for emerging-market currencies these days.

Oil prices are falling the most in six years, undermining exchange rates of energy producers from Latin America to Russia, just as slowing growth in China and a tumbling yen weigh on currencies across Asia. And surging demand for the dollar, the result of speculation that U.S. interest rates will rise, is adding to the woes of developing-nation currencies.

An index tracking 20 key exchange rates has fallen to levels last seen more than a decade ago, down 10 percent this year in what would be the biggest annual slide since 2008. Argentina’s peso and Czech Republic’s koruna will lead declines among 16 of 23 developing-nation currencies next year, according to strategist forecasts compiled by Bloomberg.

“Emerging markets are suffering slow growth, low commodity prices and weak exports,” Pierre-Yves Bareau, the London-based head of developing-nation debt at JPMorgan Asset Management Inc., which oversees $1.6 trillion, said by phone on Dec. 4. “We don’t expect that to change.”

While some developing nations may welcome a weaker currency because it makes their exports more competitive, for others the pace of decline is destabilizing their economies by fueling inflation and eroding investor confidence.

via Bloomberg

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.