Borrowing in a host country currency to do projects in that area can be a prudent way to mitigate exchange risk
However, some emerging markets countries are reliant on outside finance, and have high short-term refinancing requirements
“Focus on these markets is underpinned by the fear of a ‘sudden stop’, where capital flows halt or even reverse.
If this happens, the impact on indebted corporations can be devastating, with knock on effects for banks.” (FT, 15 January 2014)
Borrowing in a host country currency to do projects in that area can be a prudent way to mitigate exchange riskHowever, some emerging markets countries are reliant on outside finance, and have high short-term refinancing requirements“Focus on these markets is underpinned by the fear of a ‘sudden stop’, where capital flows halt or even reverse. If this happens, the impact on indebted corporations can be devastating, with knock on effects for banks.” (FT, 15 January 2014)
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