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.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.