Emerging Market Currencies Take a Big Hit in COVID Downturn
August 18, 2020
Much has been made of the American dollar’s depreciation in recent months, but the dollar’s losses pale in comparison to some currencies from emerging markets. The Wall Street Journal is reporting that Brazil’s real, South Africa’s rand and Turkey’s lira have each lost about 20% of their value against the dollar. The Mexican peso and Russian ruble have lost about 15%.
Economists worry that such sudden, drastic depreciation in these currencies could threaten their respective economies, leading to runaway inflation, which would drive up the costs of servicing foreign debts and importing goods. Fears like this also drive away foreign investors, exacerbating the problem.
Analysts who spoke to the WSJ blame coronavirus for many of these nations’ woes. This is both because countries like Russia and Brazil are seeing big spikes in infections, and also because much of these countries’ economies rely on exporting industrial commodities, which have seen demand plummet amid the global slowdown.