Sinking Currencies Point To Jitters About Emerging Economies

Aug 21, 3:18 PM (ET)
By PAUL WISEMAN and JOSHUA GOODMAN

WASHINGTON (AP) — The damage spans the globe.
Thailand's baht. Kazakhstan's tenge. South Africa's rand. Peru's nuevo sol.

In emerging markets worldwide, currencies are plunging over fears that developing economies are on the verge of a crippling fall. Success stories until recently, emerging economies are seen as casualties now — of slower growth in China, plunging prices for commodities like oil and iron ore, the prospect of higher U.S. interest rates and homegrown threats.

The damage has spilled across oceans, with the turmoil jolting investors in New York, Tokyo and Europe. Investors there worry that China and other major emerging economies will reduce their imports. They also fear a trade-disrupting currency war as some countries desperately lower their currencies' value to gain a competitive edge. A lower-priced currency makes a country's goods cheaper for foreigners.

The Dow Jones industrials plunged 400 points, or 2.4 percent, in afternoon trading Friday on top of a 358-point drop Thursday. It's down more than 6.5 percent in the past month. Tokyo's Nikkei index shed 3 percent Friday.

For all the markets' jitters, many economists say they remain confident that the U.S. economy is resilient enough to withstand a slowdown in the developing world. And Europe's economy appears to be emerging from its long slump.

Even so, the trouble in emerging markets is a surprising and unsettling reversal.

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Update the DOW dropped -530, S&P 500 down -64 and Nasdaq down -171 by the end of trading...