Recent fluctuations in Turkish financial markets have attracted attention. The dollar has depreciated wildly against the Turkish lira, major stock market indexes have plummeted, triggering circuit breakers several times, and ASUS MSCI Turkish ETF on US stocks also fell 18% in a single day.
Open source securities previously issued a research report saying that with the accelerated improvement of the epidemic in the United States and the significant acceleration of economic repair, 10-year US bond yields rose rapidly, driving the dollar into a strong channel.
The law of history shows that the upward interest rate on US debt and the entry of the US dollar into a "strong channel" will often drive capital back to the United States, and the "tail risk" of some emerging economies is easy to be exposed.
Due to the widespread pressure on foreign debt and balance of payments imbalances, emerging economies often expose tail risks as money flows back to the United States during the strengthening of the dollar.
At this time, in order to curb the rise in inflation caused by capital outflows or currency depreciation, emerging economies are often "forced" to start raising interest rates, which in turn harms domestic fundamentals and further increases the risk of capital outflows.
Looking back in history, there have been far more economic crises in emerging economies than in the United States, including the Latin American debt crisis in the 1980s and the Asian financial crisis in the 1990s.
The emergence of tail risk in emerging markets is related to the strength of the dollar, the return of funds to the US and the fragility of the bop account.
Emerging markets need to pay close attention to the upward impact of US debt and be wary of exposing tail risks to emerging economies under pressure to repay their foreign debt, such as Turkey and Malaysia.
Edit / Ray