Just hours after Fed Chair Jay Powell implied that ’emerging markets are on their own’, EM FX is re-collapsing…

with Argentina (despite a 1275bp rate hike) and Turkey both crashing to new record lows…

“There is good reason to think that the normalization of monetary policy in advanced economies should continue to prove manageable for EMEs,” Powell said, adding that “markets should not be surprised by our actions if the economy evolves in line with expectations.”

So much for the unprecedented Argentina rate-hike and Treasury Minister’s reassuring comments last week…

How much more can BCRA do? They have a scheduled meeting today.

“If the ARS remains under pressure and continues to drift upward we do not rule out further rate hikes at the scheduled May 8 meeting, or even ahead of it,” Goldman Sachs said

Goldman expects central bank to reiterate it is “ready to do more to anchor the currency and inflation expectations (preserve a hiking bias) and to signal that monetary policy will remain very tight for as along as needed”

Bloomberg reports that Argentina’s central bank sold Lebacs due in June in the secondary market at 40%, according to two people with direct knowledge (it used these notes last week to signal commitment to tighter monetary policy).

And the Turkish Lira broke above 4.3 per USD – weakest on record – and is now down 7 days in a row…

 

And as we detailed earlier, as for the indicator that markets should keep an eye on to decide when it’s time to panic, we reported yesterday that Bank of America is keeping an eye on one specific catalyst for imminent contagion: “EM FX never lies and a plunge in Brazilian real toward 4 versus US dollar is likely to cause deleveraging and contagion across credit portfolios.”