HONG KONG • Emerging-market (EM) currencies beaten down by Covid-19 fallout may face a fresh round of selling ahead of the foreign-exchange reserves data that are expected to show big drawdowns.

Mexico’s weekly data was set to come out yesterday, while Indonesia, Taiwan, the Philippines, China, Malaysia, South Africa and Russia are due to issue updates today. That comes on the heels of a US$9 billion (RM39.33 billion) slump in South Korea last month and a US$6 billion decline for India since the end of February.

EM central banks are tapping reserves to stem a decline in their currencies as the pandemic induces a rush into the US dollar as a haven. The sliding stockpiles highlight the quandary they face trying to bring stability amid capital outflows, while ensuring they have ammunition for future actions.

While most EM central banks have greater reserves than they did during the Asian financial turmoil of 1998 and global financial crisis of 2008, the macroeconomic outlook remains uncertain. The US Federal Reserve’s swap lines and a new facility, through which developing nations can secure dollars using Treasury holdings, will help ease some pressure.

But expectations the pandemic will cause a global recession are keeping the risk of capital flight elevated in the weakest links of EMs. Global funds have scaled back stock investments in South Korea, Brazil and Turkey, while selling off bonds in countries such as India and Indonesia. — Bloomberg