BAKU, Azerbaijan, June 27. After a strong start to 2022, most emerging market (EM) currencies have weakened against the US dollar since April, Trend reports with reference to Fitch Solutions.
The company says in its latest report that while attention has focused on a few crisis-hit currencies, like the Turkish lira, the weakness has become more broad-based.
“While the direction of travel is common across almost all EMs, the pace of depreciation continues to vary significantly. We note that the three major EM currencies that have weakened most significantly against the US dollar (the Turkish lira, Chilean peso and Kenyan shilling) are all oil-importing EMs.
Over the year to date, oil-importing EMs have mostly suffered the biggest currency falls. Russia is, of course, something of an exception, this is because the country’s currency is now very thinly traded. Ghana is also an exception, an oil exporter facing serious current and fiscal account stresses. Elsewhere, however, oil exporters have experienced much more currency stability than oil importers,” reads the report.
Analysts from Fitch Solutions note that other oil exporters, like Nigeria, Angola, Colombia and Brazil have all experienced appreciation against the US dollar in 2022.
“We expect that oil prices have now peaked, and will ease over the remainder of the year. This will remove a key support for the EM currencies that have held up best. Given capital outflows, rate hikes in developed markets and growing risk aversion, we expect that most EM currencies will remain under pressure for the rest of 2022.”
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