Over the past 2 weeks we have seen how much damage the turmoil in emerging market countries can have on the assets of developed nations. Investors flocked into the safety of the U.S. dollar and Japanese Yen, as the Argentinian Peso (ARS), Turkish Lira (TRY), South African Rand (ZAR), Russian Ruble (RUB) and Hungarian Forint (HUF) dropped to fresh lows. Since the beginning of year the ARS lost over 18% of its value versus the dollar while the other currencies fell more than 5%. In the past 6 months, those losses have reached approximately 30% for the ARS and 10% for the ZAR and TRY. A 10% decline in a currency’s value borders on a crisis but a 30% decline is a catastrophe that sounds the alarms inside the central bank. Unfortunately, the crisis in emerging markets spilled over to developed assets with the EUR/USD dropping from a high of 1.37 to a low of 1.3490, USD/JPY falling from 105 to 101.75 and the Dow Jones Industrial Average incurring over 650 points in losses over the past week. Is this a temporary crisis or a long term, only time will tell.
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