Currency moves point to trouble ahead for GEMs

COMMENT

We have been no fans of emerging market countries running balance of payments deficits for some time.

The question of how they pay for their imports in an era of fewer new cheap dollars is becoming a worry in share markets. Last month Argentina failed to support the peso, and its currency plunged by 11% in a single day. Inflation is already around 25%. The official rate of 8 pesos to the dollar is well above the black market rate of around 13 pesos to the dollar. These events underlined the fears in the markets that some emerging market countries with large balance of payments deficits are going to struggle to finance their imports. President Cristina Kirchner has continued with...