When investors reduce risk, the initial sell-off can be rather indiscriminate. Fears last month over rising inflation and slowing growth sparked selling in emerging market currencies from the Brazilian Real to the Turkish lira, with little differentiation based on underlying current account positions.

In time, knee-jerk reactions usually give way to a more selective approach. A deterioration in the current account deficits of both New Zealand and South Africa on Thursday prompted sharp losses in their respective currencies. A degree of contagion was evident, but it spread to other currencies with large and growing current account deficits, such as the Turkish lira and Icelandic krona. Emerging market currencies with current account surpluses, like the Brazilian real and the Korean won proved more resilient.