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Emerging-Market Rout Expected to Endure

Currency selloff projected to continue as interest rates remain low; some fear it may spill over into currencies with stronger fundamentals, including the Mexican peso.

By Ye Xie, Bloomberg, Andrea Wong, Bloomberg | Updated on February 03, 2014

Inflation-adjusted interest rates are still too low in developing nations for Citigroup Inc. and Goldman Sachs Group Inc. to foresee an end to the worst emerging-market currency selloff in five years.

One-year borrowing costs in Turkey are 3.6 percent, less than half of the average in the three years before the 2008 global financial crisis, even after the central bank doubled its benchmark rate last week, according to data compiled by Bloomberg. The real yield for Mexico is almost zero, while South Africa’s is 1.4 percent, compared with an average of 2 percent over the past decade.

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