Quartz: Crisis in Emerging Market Currencies

Currency worries are not unusual for emerging economies. As currencies decline in value, investors may withdraw, and exchange with other currencies can become difficult; the countries struggle to make payments especially on debt in more costly US dollars. “What began in Argentina and Turkey has snowballed into broader collapse in confidence that has policy makers in Indonesia, India, South Africa, and Brazil scrambling to protect their economies,” writes Eshe Nelson for Quartz. “Left unchecked, more nations could get wrapped up in the declines, threatening their country’s and the world’s economic growth.” The Argentina peso has lost half its value so far in 2018, the Turkish lira has lost more 40 percent while the Indian and Indonesian currencies have lost about 10 percent. Central banks and governments typically respond by increasing interest rates, selling reserves, reducing government spending and seeking support from the International Monetary Fund. The worries spread as investors detect similar debt, inflation, trade deficit and devaluation patterns in other economies. – YaleGlobal