Here are the highlights from the Financial Times article:

The other shoe has finally dropped: emerging market currencies have followed emerging market equities into the global financial storm.
When the Greek crisis, combined with worries about a possible US recession, frightened global markets in August, emerging economy equities plunged in line with a general flight to safety. Emerging market currencies held firm, buoyed by inflows into local bonds, cash and cash derivatives.
However, the latest fears about the eurozone have now hit confidence in emerging market currencies. While it falls far short of a total rush for the exits, traders are reporting a sprint for the doors led by hedge fund managers and other short-term investors.
“It has proved yet again that the decoupling idea just isn’t correct,” says Paul Mackel, head of Asia currency research at HSBC. “There’s a panicky situation in the eurozone and it’s spilling into emerging markets.”
The latest turmoil has poleaxed even the seemingly invulnerable Brazilian real, which has plunged to one-year lows. Global difficulties have been compounded by this month’s unexpected interest rate cut following an increase as recently as July. With the benchmark rate still at 12 per cent, and inflation at about 7 per cent, real interest rates remain among the world’s highest. In normal circumstances that would be a powerful pull for investors. Not now.
So how much further can emerging market currencies drop? Quite a bit if the eurozone crisis gets worse.
So far, international investors have mostly not reversed the great surge of buying emerging market bonds that has been such a global feature this year. They have mainly sold the currencies and hedged their holdings. Bhanu Baweja, strategist at UBS, the Swiss bank, warns they may not keep these positions much longer, given that US Treasuries are up 8 per cent this year, but emerging market local currency bonds are barely above zero. “If we see another broad dollar rally, investors will be selling these bonds.”

Full article here.
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