Thursday, October 23

Investors rethink rand and other currencies

High-yielding emerging market currencies are coming under pressure as falling returns make investors think again whether they are being compensated enough for the risk of holding them.

Analysts see the Turkish lira and South African rand as most vulnerable to a major reversal, particularly given the scale of their gains against the dollar so far this year.

The rand is up over 20 percent on the year to date, though off three-and-a-half-year highs hit earlier in the month, while the lira is still up over 12 percent on the year, even after recent losses.

"Turkey and South Africa have both cut interest rates aggressively this year and risk-reward levels are now a lot lower," says Ashley Dodd-Noble, emerging markets strategist at BNP Paribas.


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