EM central banks ramp up defence as dollar surges ahead

From Brazil to South Korea, emerging-market central banks are forming a line of defense as a rising dollar pushes their currencies to multi-year lows.

- Bloomberg

Bangko Sentral ng Pilipinas is watching the peso's drop closely and has stepped up intervention in the currency market, Governor Eli Remolona said Friday. Brazil's central bank has spent $17 billion in the past week to support the real, while Bank Indonesia vowed to guard the rupiah "boldly" to build market confidence. In Europe, Hungary's central bank joined the trend, raising the interest rate on its foreign-currency swap tender to calm markets.

Authorities in developing economies are on the defensive as the greenback's strength wreaks havoc across global markets, with South Korea's won falling to the lowest in over 15 years while India's rupee and the real crashed to all-time lows. A rapid decline in currencies risks worsening the impact of imported inflation for emerging markets, and may also increase the cost of servicing debt on foreign liabilities.