Reversal of capital flows puts the region in a vicious circle. The outflow of capital to other markets further increases the pressure on the exchange rate of local currencies and financial markets. The devaluation of local currencies against the US dollar, in turn shrinking demand for imported goods and related consumption. In June, total imports in emerging markets decreased by 13.2 percent compared to the same month last year, according to data of Capital Economics.

“The collapse in imports in emerging markets reflects the fundamental decline in domestic demand, which plays a major role outflow of capital. However, the decline in commodity prices shrink revenues of countries that rely on such exports,” says Neil Schering from Capital Economics. “So far there are no signs that we have reached the bottom of this decline,” he added.

“The currencies of developing countries bear the brunt,” says Bernd Bragg, strategist at Societe Generale. “Concerns about global growth are driven mainly by the significant slowdown in emerging markets. The moderate recovery in developed economies is not enough to offset the weakness in countries such as China,” he added.

The currencies of developing countries have been placed under increased pressure after the devaluation of the yuan kitayskyai whose course until recently was one of the few sources of stability. The renewed decline in stock indices in the country also called into question the ability of Beijing to reinvigorate economic growth. Political instability in countries such as Turkey, Brazil and Malaysia, as well as geopolitical tensions around Russia further undermine confidence in developing economies as a whole. While forecasts that the Fed will start raising interest rates this fall, strengthen the dollar against other currencies.

Among the currencies of developing countries the greatest losses registered the Turkish lira and the Russian ruble. Chilean and Colombian peso also weakened due to fall in prices of raw materials such as copper and oil.