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bloomberg.com/news/articles/2018-05-29/why-some-emerging-markets-are-suddenly-melting-down-quicktake
Investors had been enamored with emerging markets for more than two years. These days,
they’re not so besotted. For several weeks, money has poured out of developing nations
and into the U.S., causing the dollar to rise in value and the currencies of emerging markets
to hit new lows. Turkey has been at the center of the rout, but many other countries,
including Argentina, Hungary and Indonesia, have been hit as investors dump riskier stocks
and bonds for the safety of U.S. assets. For some economists, it raises the specter of the
late 1990s-era Asian economic crisis. What’s going on?
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currencies were pegged to the dollar, South Korea and other nations were forced to spend
billions trying to fend off speculators who were selling their currencies. They soon ran out
of dollars and had to give up the peg and devalue their currencies. The contagion spread
when foreign investors pulled back from other countries in the region seen as having similar
problems. Several ended up seeking bailouts from the International Monetary Fund.
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The Reference Shelf
A QuickTake explainer on Turkey’s vulnerability.
How some of the key emerging-market indicators have evolved since 2008.
Emerging-market companies and governments straining to deal with the rising cost
of borrowing in dollars face increasing pressure as a record slew of bonds come due.
Investors are punishing markets where policy makers haven’t done enough to stem
deteriorating current-account balances, ballooning inflation and a run on their
currencies.
The Institute of International Finance lowered its forecasts for portfolio flows to
emerging markets after investor appetite for debt tapered off significantly.
Should emerging markets worry about U.S. monetary policy announcements?
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