(MENAFN - Gulf Times) Emerging currencies sold off sharply again yesterday after Argentina's peso suffered its biggest one-day decline since 2015 overnight, with Turkey's lira, the South African rand and the Indian rupee all feeling the heat.
The Argentine peso crashed over 7% after a collapse in investor confidence in President Mauricio Macri's government. The central bank intervened to try and stabilise the peso, but the currency still closed at a record low of 34.10 per dollar. The International Monetary Fund (IMF) said it was studying Argentina's request to speed up disbursement of a $50bn loan programme.
'The external environment has deteriorated since the programme was agreed, so more policy effort may be needed in return for a rephasing of the arrangement, said Stuart Culverhouse, chief economist and global head of fixed income research at Exotix Capital.
'While this should still be viewed as positive, it demonstrates how fragile and exposed Argentina remains just two months after its IMF agreement.
Piotr Matys, an emerging markets strategist at Rabobank, added that the peso's continuing fall despite the IMF programme only proved how difficult it was to restore investor confidence once it was lost: 'It's a major warning signal for Turkey.
The Turkish lira tumbled 1.9% to a two-week trough in its fourth straight day in the red.
Turkish five-year credit default swaps rose 8 basis points (bps) from Wednesday's close to a two-week high of 516 bps, according to IHS Markit.
Ratings agency Moody's sounded the alarm about Turkish bank debt earlier this week. However, Turkey's finance minister was quoted as saying he saw no big risk to the economy or financial system. Turkish stocks fell 0.6% and Turkish bank shares were down 1.1%. Matys noted Turkey hadn't announced any new measures to restore investor confidence since last week's holiday.
'If anything, recent comments from officials indicate they are confident that the measures they have implemented so far will prove sufficient, which is not the case, he said, adding investors still wanted to see a proper rate hike and tighter fiscal policy.
South Africa's rand fell 1.6% and stocks slipped 1.2% after telecom group MTN's shares plunged over 22% to their lowest level since 2009. The moves followed an order from Nigeria that MTN return $8.1bn. In Asia, India's rupee slipped 0.3% to another record low and the Indonesian rupiah hit a near three-year low.
China's yuan weakened 0.2%, erasing all the gains it has made this week following the central bank's latest move to stabilise the currency.