Frontiers bear the brunt of the sell-off

Frontier financial markets have been among the main victims of the recent EM sell-off. The Argentine peso has been by far the worst performing frontier currency, falling by around 17% against the dollar. The central bank was forced to hike interest rates aggressively, although it required the authorities to turn to the IMF for financial support before a semblance of calm descended on Argentine markets. That said, interest rates will remain at emergency levels for some time, which combined with a broader tightening of financial conditions and planned fiscal consolidation, will push the economy into recession in the coming quarters.