An investment guru warns that Turkey is not the only country that could face a currency crisis

Published:

Nov 24, 2021 14:11 GMT

On Tuesday, the Turkish lira plummeted to a record low after the country’s president, Recep Tayyip Erdogan, insisted on his controversial policy of cutting interest rates amid rising inflation.

Turkey would not be the only country facing a currency crisis if the forecasts of a rise in interest rates in the United States are confirmed, according to the renowned American investor Mark Mobius

In an interview on CNBC, Mobius answered affirmatively to the question whether the sharp devaluation of the lira, Turkey’s national currency, could spread to the economies of other nations. “With higher interest rates in the United States, everyone else countries that have debt in dollars will be affected“said the investor.

On Tuesday, the Turkish lira plummeted to a record low of 12.8 against the US dollar, a day after the country’s president, Recep Tayyip Erdogan, insisted on his controversial policy of cut interest rates amid rising inflation.

Countries at risk of currency crisis

According to the Damocles index of emerging currencies, prepared by the investment bank Nomura, four emerging economies are particularly at risk of suffering a currency crisis: Egypt, Romania, Turkey and Sri Lanka.

The deterioration of the national currency generates protests in Turkey (VIDEOS)

“Looking ahead, the prospect that the Federal Reserve [de EE.UU.] normalize monetary policy amid China’s economic downturn is not a particularly good match [para los mercados emergentes]”Nomura noted in his report, released last week.

This month, the U.S. Federal Reserve plans to begin slow down your asset purchases. This comes at a time when emerging markets are facing a number of challenges, such as increasing fiscal and current account deficits, as well as rising food prices.

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