Japanese firm warns Sri Lanka among seven countries at high risk of currency crises

 

Japanese firm warns Sri Lanka among seven countries at high risk of currency crises Nomura has warned that seven countries - Egypt, Romania, Sri Lanka, Turkey, Czech Republic, Pakistan and Hungary - are now at a high risk of currency crises. 

The Japanese bank said that 22 of the 32 countries covered by its in-house “Damocles” warning system have seen their risk rise since its last update since May, with the largest increases in the Czech Republic and Brazil. “This is the highest total score since July 1999 and not too far from the peak of 2,692 during the height of the Asian crisis,” Nomura economists said, calling it “an ominous warning sign of the growing broad-based risk in EM currencies”. 

Based on data from 61 different EM currency crises since 1996, Nomura estimates that a score above 100 indicates a 64% chance of a currency crisis in the following 12 months. Default-stricken Sri Lanka and currency crisis-regular Turkey both generate scores of 138, while the Czech Republic, Pakistan and Hungary notch 126, 120 and 100 respectively.