The heady combination of a surging dollar and expectations of a U.S. rate hike has once again sent emerging markets (EM) into a spin, but the fallout may not be severe as in the past according to analysts.
The Indonesian rupiah slumped to a 17-year low against the dollar on Wednesday, while the South African rand hit a fresh 13-year low at about 12.3775 per dollar before recovering.
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In fact, this week has seen renewed pressure on currencies from Brazil to Turkey, raising fears that a resurgent dollar will lead to financial pressure on emerging markets.
"Specifically, the worry is that a rise in the dollar will lead to strains in the balance sheets of EMs (emerging markets) which have borrowed in foreign currencies. After all, it was a rally in the dollar which triggered the series of EM crises in the 1980s and 1990s," William Jackson, senior emerging markets economist at Capital Economist, said in a note Wednesday.