Thursday, September 13, 2018

This year began with large currency overvaluations in Argentina and Turkey, but the Peso and the Lira are at this point undervalued, the latter significantly so. Across the EM landscape, the most egregious overvaluations are therefore gone, with only a few emerging market currencies still located in overvaluation territory. In Argentina, the focus shifts to upsizing the IMF program, which we think is needed. The key issue in Turkey is the scale of contraction coming from the BoP “sudden stop.” Risks to EM are shifting back to China and a possible resumption of RMB devaluation should the trade dispute with the US escalate with an additional round of tariffs.

IIF Authors

Robin Brooks

Robin
Brooks
Managing Director and Chief Economist
@RobinBrooksIIF
rbrooks@iif.com

Jonathan Fortun

Jonathan
Fortun
Associate Economist
@econchart
jfortun@iif.com

Tariq Khan

Tariq
Khan
Research Analyst
+1 202 857 3339
tkhan@iif.com

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