Expats may struggle to maintain their standards of living as falling currencies and inflation due to rising costs of imports undermine their income.
However, fears about the strength of emerging market currencies might not be as serious as many analysts believe, according to a new report.
Concerns on the money markets about the fragile currencies of India, Brazil, Indonesia, Turkey and South Africa are not supported by currency movements, argues Andy Payne, of ECA International, an economic analyst dealing with currency and inflation.
Payne believes the five emerging market currencies will not dip back into crisis.
But he does pinpoint Argentina peso as the one to watch after a month of spectacular losses in his analysis of January’s currency winners and losers.
“Most emerging markets have defences against plunging values,” he said. “They have had time to prepare for the impending taper of quantitative easing in the US and other developed countries. Add to that, they have better flexibility in exchange rates, smaller debts and deficits and have hoarded foreign currency reserves.”
Payne explains that the largest negative movements in currencies are not as a result of the US Federal Reserve readying for taper or a slowdown of growth, especially in China.
Currencies under threat
“Most emerging market economies are based on exporting,” he said. “This should help rather than hinder their economies.”
The currencies that are likely to suffer the worst are those of Argentina, Venezuela and the Ukraine, he predicts.
These tables below give more detail about the currency winners and losers for January.
Source: ECA International January 2014
Top offshore saving rates
Meanwhile, offshore savings rates for expats remain unchanged this week.
The best notice account rate is with Kleinwort Benson, but requires a massive £100,000 on deposit for 189 days to garner just a 1.76% return. For savers with less cash to tie up, Skipton International offers 1.75% for £10,000 on deposit for 180 days.
For fixed rate bonds, Skipton International remains the leading deal at 2.75% for £10,000 on deposit until January 31, 2019.