This is a very good explanation from Matthew O’Brien in The Atlantic on the EM currency collapse that is injecting volatility into global markets. From the linked article: First, money poured into emerging markets when it looked like they offered juicy returns. Then it poured out after they didn’t. Currencies are collapsing. Stock markets are falling. And central
banks are sacrificing the real economy to save the exchange rate. We’ve seen this movie before. It was called the East Asian financial crisis, back in 1997. But, for once, the sequel won’t be worse than the original. Emerging markets don’t have enough foreign-money debt this time around to make their falling currencies much of a concern. What is a concern is whether their central bankers realize this. They might overreact—they might already be—and raise rates
to prop up their currencies, when they should be lowering them to prop up their economies.