EM currencies

Emerging market currencies take a pounding

Foreign exchange weakness has dramatically exacerbated declines in emerging equity markets as investors unwind carry-trades, according to Citi.
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Students in Brazil call for lower interest rates at a protest last month – a demand that was unexpectedly met when the central bank cut rates on August 30 (AFP) </div>
<div style="text-align:left;"> Students in Brazil call for lower interest rates at a protest last month – a demand that was unexpectedly met when the central bank cut rates on August 30 (AFP) </div>

Any hopes that emerging markets could somehow ring fence themselves from the eurozone debt crisis and the misery of the US economy have been unequivocally shattered this month. Forget it.

More specifically, it is their currencies that have suffered a rout, justifying the decisions of many central banks to build up their foreign exchange reserves in recent years.

Global emerging stock markets GEMs have slumped by almost 18% in September, which is the worst monthly decline since October 2008, according to a Citi research report issued this week. And, given the savage unwinding of the emerging market carry trade, over 40% of that collapse is...

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