Emerging market currencies succumbed to a sell-off again on Tuesday, with currencies tumbling across the board — some to new record lows.
Among the worst hit was Indonesia's rupiah, which fell to a new two-decade low on Tuesday at 14,940 against the dollar, then recovered slightly to 14,925 by Wednesday midday. The Argentine peso fell about 3 percent — it had already crashed 16 percent last week, bringing its losses this year to almost 50 percent against the dollar.
Also on Wednesday morning, the Indian rupee fell to a new low for the seventh day to 71.78. Turkey's lira slid as well on Tuesday, and the South African rand plunged about 3 percent on data that its economy has sunk into a recession.
Overall, the MSCI Emerging Markets Currency Index declined 0.46 percent on Tuesday — the biggest drop in two weeks. Since the start of the year, it has fallen 5.53 percent.
Despite fears of emerging markets contagion growing, analysts said investors should not panic simply on negative sentiment.
Karine Hirn, a partner at asset manager East Capital, said that the stress can be partly attributed to a strong dollar and rising oil prices, but the real issue is trader sentiment.
"Let's not forget that, in general, emerging markets are really exposed to sentiment issues because a lot of investors are from overseas and not necessarily domestic investors. And the sentiment is definitely hurt by these trade tensions around the world," she told CNBC's "Squawk Box."
However, she stressed, the real point is that she is not seeing "big issues" arising from company earnings — businesses are generally not hurting.
The rupee and the rupiah have been under the most pressure among emerging currencies in Asia so far, analysts pointed out. But ANZ Head of Asia Research Khoon Goh said that the underlying economy in Indonesia is actually "not looking too bad," with second quarter growth increasing.
"This is largely financial markets reacting to contagion fears. Now, of course, that complicates matters for policy makers in Indonesia because their main priority is to try and stabilize the rupiah," Goh told CNBC's "Street Signs" on Wednesday.
Meanwhile, Indonesian President Joko Widodo said on Wednesday that multiple external factors were behind the depreciation in the rupiah and the priority was to increase investment and exports to contain the country's current account deficit. Typically, a widening deficit can weaken the currency further, as more imports mean buying more foreign currencies to meet a country's needs.
"There are only two key (things) — investments must continue to increase and exports must also increase so (we) can resolve the current account deficit," the president told reporters during a visit to Jakarta's port, in comments posted on the cabinet secretary's web page.
Vishnu Varathan, Mizuho Bank's head of economics and strategy, called the growing concerns of contagion "overblown" but "completely understandable."
"It is crucial (to) not hastily lurch towards a self-fulfilling prophecy of (emerging market) contagion risks," he cautioned, saying that the record plunges in the Argentine peso and the lira are in a "very different ballpark" compared to the declines in the rupiah and rupee.
Still, he said that headwinds from trade tensions between the U.S. and China could put more pressure on emerging markets down the road.
Amid the mayhem, one currency in the region is bucking the trend: the .
"Investors know which economies to worry about, and which ones not to. And if you look at Thailand, huge current account surplus, just under 10 percent of GDP. Growth is actually starting to accelerate and pick up," said Goh of ANZ.
— Reuters contributed reporting to this article.