Menu

Search

  |   Commentary

Menu

  |   Commentary

Search

Emerging economies at crossroads of tighter dollar liquidity

Emerging markets were the principal victim of the 2013 taper-tantrum and concern is that once actual fed rate hikes commence, new stress could appear. 

Particularly vulnerable are those economies with significant leverage and large exposure to dollar denominated debt. 

Historically, a credit boom has often preceded a subsequent emerging market crisis. Fear is that once the Fed starts to tighten, balance sheets in a number of emerging economies will come under significant pressure.
 
Societe Generale notes....

  • First of all, a more significant share of sovereign debt is today issued in the domestic currency. 

  • Foreign currency debt is more concentrated in the corporate sector, which often enjoys matching with foreign currency revenues. 

  • Moreover, more flexible FX rate regimes and large reserves provide additional buffers. As such, we believe the dark side of dollar debt is light grey rather than black. Nonetheless, vulnerabilities remain.

  • Market Data
Close

Welcome to EconoTimes

Sign up for daily updates for the most important
stories unfolding in the global economy.