Beware the vagaries of fashion. For the past decade, global capital has been drawn to emerging market currencies like bees to a honey pot, helping fund consumer booms from the suburbs of São Paulo to the souks of Istanbul. Now much of that capital is taking flight, leaving emerging market governments with a current account headache and some very tough choices.
Since US Federal Reserve chairman Ben Bernanke signalled in May a potential tapering of the central bank’s massive bond-buying programme, emerging markets investors have backed off, withdrawing more than $52bn from bond and equity funds since the beginning of June, according to data provider EPFR Global.
