Argentina leads the emerging markets ‘bloodbath’

January 24, 2014

The Argentine peso had a terrible day on Thursday, falling 11% against the dollar. It was the worst day since the country’s 2002 financial crisis. In fact, there’s a broader rout in emerging markets going on.

This week, the Argentine central bank “gave up its battle against the peso’s decline” as foreign reserves sank lower, according to Reuters. Here’s what those reserves look like:¬†

Here’s more from Reuters about what’s going on inside the country:

Due to local currency controls, the black market is the only way for many Argentines to get their hands on dollars as confidence in Latin America’s No. 3 economy falls and inflation soars. Given the country’s history of repeated financial crises, Argentines like to save in dollars.

According to private analysts, consumer prices rose more than 25 percent in 2013, although discredited official data clocks inflation at less than half that.

Unorthodox policies, from currency controls meant to stop capital flight to heavy stimulus spending unencumbered by inflation targeting, have made Argentina a no-go zone for all but the most risk-hungry investors.

Earlier this week, the BBC reported that the government has restricted online shopping in an attempt to bolster its foreign reserves. Argentinians now have to “sign a declaration and produce it at a customs office, where the packages have to be collected,” for any item purchased on an international website (such as Amazon).

Argentina had the worst day, but it isn’t isolated. Sam Ro writes that there is an “emerging currency market bloodbath”. Morgan Stanley’s Rashique Rahman told Ro he doesn’t see any one cause for the currency drops.¬†Here’s the Business Insider chart of EM currencies against both the dollar and the euro (via Bloomberg and Morgan Stanley):

 

 

 

 

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