Emerging Market Currency Crisis

| May 31, 2018
Share |

An update:

The recent turbulence in emerging markets (EM) has so far prompted a pause on rate cuts from Brazil, triggered the first rate hike since 2014 from Bank Indonesia, prompted multiple dramatic rate hikes from Argentina’s central bank and even forced Erdogan to acquiesce to an emergency rate hike to put the brakes on the Turkish lira’s collapse (that hike was followed by an important announcement from CBT on the future of monetary policy in Turkey).

Then on Wednesday, Bank Indonesia hiked again at an early policy meeting, proving new Governor Perry Warjiyo is pretty serious about staying ahead of the game. This was expected, but its significance shouldn’t be completely downplayed or otherwise lost in the shuffle. The rupiah sank to a 29-month low earlier this month and bond yields have been on the rise, as Indonesia is coping with the same external shocks from tighter Fed policy as the broader EM complex.

I know, I know what does all of that have to do with my portfolio? Potentially plenty down the road. As the Federal Reserve continues to hike rates and stays the course with Quantitative Tightening (QT), the US Dollar has bottomed earlier this year and continues to strengthen. This has, along with the 3 D's (Debt, Demographics and Deficits) have hit emerging markets and their currencies hard.

This is just another issue for the Federal Reserve to incorporate into rate hike decisions later this year.


Stay Tuned, Disciplined & Patient! {TJM}

The Investor & Character Equation (ICE) | S + R = O


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Meyer Capital Group), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Meyer Capital Group. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Meyer Capital Group is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Meyer Capital Group's current written disclosure statement discussing our advisory services and fees is available for review upon request.

Share |