In 2018, EMs hiked rates to arrest currency slide

Emerging markets have raised rates to arrest sliding local currencies. A cocktail of factors have contributed to such falls amid global dollar strengthening. In past year, rate hikes by the US Federal Reserve have triggered a capital flight to safe-heaven assets from emerging markets.

The Argentine Peso and the Turkish Lira are two worst performing currencies this year with the contagion spreading over other emerging markets like India and Indonesia.

The peso and the lira lost 51-38% value against the greenback this year. The central banks of both countries have announced sharp rate rises in the past six months to contain local currency routs.


Emerging markets, with larger share of overseas crude shipments, have also lost steam as rising oil prices have dented local fiscal conditions. Moreover, growing trade tensions have dampened global investor sentiment driving international investors to dollar-backed assets.