The South African rand, Indonesian rupiah, and Colombian peso recorded losses last week as heightened trade tensions triggered renewed investor retreat from emerging markets.
The sell-off followed an escalation of tariff policies from the United States under the Trump administration, fueling risk-off sentiment globally and placing pressure on emerging-market (EM) currencies.
The broader MSCI Emerging Markets Currency Index declined after reaching a five-month high earlier in the week.
Strategists at Societe Generale and Goldman Sachs attributed the downward pressure to increased global uncertainty and weakening investor appetite for risk assets.
Analysts at Societe Generale noted that EM currencies remain under threat despite temporary rebounds, warning that the trajectory for the Chinese yuan also points toward a modest depreciation.
China on Monday adjusted its yuan reference rate to the weakest level since September 2023.
The move reflects growing strain on Asia’s largest economy as it responds to ongoing tariff challenges and softening export performance.
Goldman Sachs analysts explained that while the U.S. dollar correction could support exchange rates in developed markets, emerging economies remain vulnerable.
The firm expects little relief for currencies such as the rand and peso amid constrained foreign exchange reserves and external shocks.
The South African rand and Indonesian rupiah were among the worst performers, with political and fiscal concerns compounding the impact of trade policy volatility.
In Turkey, analysts at Morgan Stanley revised forecasts for the lira, citing a potential loss of $10 billion in foreign reserves due to the prolonged trade conflict and recent domestic political developments.
Morgan Stanley recommended against carry trades in Turkey, adding that foreign investor positioning has likely diminished further due to market instability.
Meanwhile, the weakening in EM currencies coincided with a 3.7 percent drop in the MSCI Emerging Market Index as global funds continued to scale back risk exposure.
Political events in countries such as South Korea and Indonesia have further eroded investor confidence in the region’s growth prospects.
In response to the macroeconomic risks, Singapore eased its monetary policy, becoming the latest Asian economy to react to the weakening global outlook.
Despite the broader sell-off, Indian equities stood out with relatively limited declines. Analysts at Nomura Holdings described India as a “relative safe haven” due to its lower dependency on global trade flows and resilient macro fundamentals. The MSCI India Index registered only half the loss of its regional peers.
With the current environment defined by elevated volatility and policy unpredictability, market participants are shifting toward more stable asset classes and regions with less exposure to tariff fallout.
Investors are expected to monitor upcoming data releases from China, including GDP and export figures, along with inflation updates from Nigeria, Saudi Arabia, and Poland. Interest rate decisions in Turkey, Egypt, and South Korea will also influence market sentiment in the coming week.
As global uncertainties continue to weigh on financial markets, pressure on emerging currencies is expected to persist, with policymakers across affected economies likely to adjust strategies to mitigate further capital flight.
