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Peso Panic! Massive Argentine Peso Plunge Deepens Emerging-Market Selloff (10Y Sovereign Yield Spikes 58 Basis Points)

This is a syndicated repost courtesy of Online Course Notes For Financial Markets and Banking. To view original, click here. Reposted with permission.

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(Bloomberg) — The brutal tumble of Argentina’s peso added to the list of concerns over the ability of developing economies to defend their currencies as the era of cheap money wanes. Emerging-market assets extended losses a day after the Federal Reserve’s more hawkish signals.

A measure of currencies in developing nations slid to the lowest since December, while the MSCI Emerging Markets Index sank — led by industrial and technology companies. The Argentine peso slumped more than 6 percent on reports of changes at the country’s central bank and after truck drivers began a strike. The Brazilian real dropped a fourth day as the impact of a massive sale of foreign-exchange swaps was short lived.

Developing-nation assets took a beating as signals of a slightly more aggressive pace of Fed hikes added to concern over further currency depreciation in developing economies. Meanwhile, the European Central Bank said a rate increase won’t come until the summer of 2019, though it announced it would end stimulus in December, setting the euro area up for an exit from years of heavy monetary support.


And with the Argentinian Peso Panic, we have their 10-year sovereign yield rising faster than Eva Peron’s popularity.


Their yield curve is … lumpy.


It is time to cry for Argentina.


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