Dollar Gains Against Turkish, Argentine Currencies

By Anonymous

The dollar rose against a batch of emerging-markets currencies Tuesday, boosted by worries over financial and political turbulence in developing countries.

The U.S. currency was recently up 2.4% against the Turkish lira and gained 1.3% against the Brazilian real. It rose 1.7% against the Argentine peso to a fresh all-time high.

Turkey and Argentina have been at the forefront of an emerging-markets selloff sparked by concerns that higher U.S. yields will pressure countries that had borrowed heavily in dollars over the past few years.

The German government is considering providing emergency financial assistance to Turkey as concerns grow in Berlin that a full-blown economic crisis could destabilize the region, The Wall Street Journal reported. Argentina, a smaller emerging economy facing similar problems, received a $50 billion credit line from the International Monetary Fund in June.

Brazil, meanwhile, is facing worries over a presidential election set for later this year, as populist candidate Jair Bolsonaro has struck a chord with a deeply disillusioned public and is threatening to overturn the political status quo.

Some analysts believe uncertainties in Turkey and other countries will cast a chill over emerging markets as a whole in coming months.

“The Turkish turmoil has shown that, even without direct economic links among countries, one currency’s fall can trigger others to follow suit,” analysts at UBS Wealth Management said in a note to clients. “At the very least, seeing one currency tumble reminds investors of the risks that come with emerging markets.”

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was up 0.1% to 89.19.

Write to Ira Iosebashvili at [email protected]