In a slow but sustained way, the economic recovery of the United States puts pressure on the currencies of emerging countries.
Yesterday, the Treasury yields of the country of the North went back up to 3.11%, a basic point over its record the previous day. Investors around the world believe that the increases could take a breather, although they warn that it is difficult against a strengthened dollar.
This is bad news for emerging economies, which have seen their attractiveness diminish as investors choose “flight to quality” and reposition themselves in US assets.
The currencies of these countries had another difficult day yesterday. In Brazil, for example, although the Central Bank surprised the market on Wednesday by deciding to keep the reference rate unchanged, the dollar jumped again by 0.7% and closed at 3.71 per real, its highest level since April 2016. Thus, since April 30, the Brazilian currency has accumulated a 4.4% drop against the dollar and is among the most affected by the recent increase in the Treasury rate in the United States.
In Mexico, the peso also lost 0.44% against the dollar. The rise of the US currency globally also pressured the Turkish lira another 1% and was within a new historical maximum in that country. This currency is one of the most lost in this context of global trend change, fell 8.10% since the last day of April, and was only overcome by the run against the Argentine peso, which depreciated 14.6% in the last eighteen days.
Yesterday, the strengthening of the dollar also caused falls against the South African rand, the Russian ruble and other currencies.
Thus, the emerging currencies are heading for their worst week since the moment in which Donald Trump won the presidential elections, in November 2016.
However, according to analysts, the damages to these economies can be offset by the recent rises in the prices of oil, copper and other raw materials that are exported by these. The price of crude reached its highest level since November 2014.
“Emerging market currencies have moved a considerable amount in the last month and as a group are under tension by technical indicators,” Societe Generale analysts told clients in a note this week.