- The concerns about developing economies are being heightened by the Fed’s recent decision to begin pulling back on the bond-buying stimulus programs that have helped keep interest rates low around the world. Now, many countries that had come to rely on those low rates could face a surge in borrowing costs and a period of painful readjustment. Many emerging countries could also be hurt if investors choose to pull their money to chase returns in the recovering economies in the United States and Europe.
“A lot of these currencies are getting trashed and people’s standards of living are going down,” said Michael Purves, the chief global strategist at Weeden & Company. “There is a potential for social unrest to accelerate.”