Bank of America expects emerging market currencies to fall 5 percent due to Trump’s policies
Date
11/26/2024 2:23:53 AM
(MENAFN) bank of America has forecast that emerging market currencies will decline by 5 percent in the first half of 2025, driven by significant selling of sovereign debt amid the risks associated with Donald Trump’s trade war. The bank’s strategists noted that the Chinese yuan will experience the largest decline, potentially triggering similar downturns in other emerging market currencies and government debt.
The bank’s analysts predict that the Chinese currency could fall to 7.6 yuan against the dollar in the first half of 2025 if the next U.S. administration imposes 40 percent tariffs on Chinese goods, and it could drop further to 8 yuan if the tariffs reach 60 percent. The expectation of a major decline in the yuan reflects concerns over the ongoing trade tensions and their potential economic impacts.
David Hauner, an expert at Bank of America, highlighted that the decline in oil prices caused by Trump’s policies could further pressure high-yield sovereign debt in emerging markets. He warned that capital could flow out of these markets as risk premiums rise due to the heightened uncertainty brought on by trade policies and tariff escalations.
Hauner also pointed out that markets are concerned not only about the size of the tariffs but also about their broader effects on global economic growth. The tariffs are expected to arrive at a time when global economic activity is significantly weaker than it was in 2018, amplifying the risks of a sharp slowdown.
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