Peso, Rand Plummet As Emerging Market Crisis Deepens

The EM contagion is slamming currencies around the globe, and while the Turkish Lira remains relatively immune for the time being, traders are now focusing their attention on the South African rand and the Argentine peso, both of which are in freefall this morning.

The ZAR has plunged 3.2%, the most since Nov. 10, 2016 on a closing basis, after the country reported that it had unexpected slumped into recession, which in turn is reigniting concerns about a rating agency downgrade. At the same time, the yield on rand-denominated government bonds has jumped 24bps to 9.24%, the highest since Dec. 1.

The Argentine peso is the other EM currency in freefall this morning, dropping 5.5% to 39 per dollar (vs the Friday close dueo the Monday US holiday) when the market opened in Buenos Aires Tuesday following a new series of measures announced by the government on Monday, including new export tariffs to help close fiscal gap by 2019, a move which the market clearly finds insufficient.

As Bloomberg notes, NY-traded shares of Argentine companies opened down, with the Bank of New York Mellon Argentina ADR Index dropping 4.4 percent at the open. Bank stocks led declines with drops of as much as 13 percent.