WASHINGTON (AP) — President Recep Tayyip Erdogan is blaming the United States for Turkey's financial crisis, ignoring homegrown problems like high debts, raging inflation and his own erratic policies.
Yet one of the threats facing Turkey and other emerging-market countries really is made-in-America: By ratcheting up U.S. interest rates, the Federal Reserve has — unintentionally — led investors to pull money from emerging markets like Turkey, strengthened the dollar's value and made it harder for foreign companies to repay their dollar-denominated debts.
The resulting flight of capital into safer and higher-yielding U.S. investments has sent many emerging-market currencies tumbling. The MSCI Emerging Markets Currency Index has sunk nearly 8 percent since March.
Especially vulnerable are countries with weak economic fundamentals: Runaway inflation, bulging trade deficits, piles of foreign debt and paltry foreign-currency reserves.