EMERGING MARKETS-Currencies plunge in global sell-off, domestic problems bite

martes 10 de marzo de 2015 11:18 GYT

(Updates with trading in Latin America)

By Karin Strohecker and Walter Brandimarte

LONDON/RIO DE JANEIRO, March 10 (Reuters) - Emerging market currencies sold off on Tuesday as a combination of U.S. interest rate fears, Chinese data and Greece concerns drove the Mexican peso to its weakest point ever and pushed several other currencies to multi-year lows.

Currencies from countries with more fragile economies and political problems suffered the most, with the Turkish lira trading near a record low and the Brazilian real sliding for a seventh straight session.

"We are seeing the largest weaknesses in some of the familiar emerging markets like South Africa, Turkey and Brazil," said William Jackson, senior emerging markets economist at Capital Economics. "Politics seems to be playing a role."

Against a basket of key currencies, the dollar was near its highest in almost 11 years as investors brace for higher U.S. rates that may reduce the allure of higher-yielding assets in emerging markets.

Renewed concern about Greece's debt talks with euro zone partners and China's inflation spike, which called into question Beijing's strategy to support growth, also weighed on emerging markets in general.

Protracted periods of dollar strength have been rare during the 40 year-era of floating exchange rates, but have tended to trigger problems in emerging markets when they have happened. Most notably, in 1997/98, many Asian countries and Russia were forced to dramatically devalue their currencies, with some defaulting on debt.

Because some emerging market governments and companies rely disproportionately on dollar borrowing, greenback appreciation makes repaying their loans more expensive, sometimes sowing seeds of default and contagion.   Continuación...