Three new additions have been added to Nomura’s list of countries that will face an exchange rate crisis next year, writes Naftemporiki.

Emerging market currency vulnerability is now at its highest level in two decades and is an “ominous warning” of rising risks across the board, Nomura said.

A Damocles score above 100 means that the economy is vulnerable to an exchange rate crisis in the next 12 months. Four countries – Egypt, Romania, Turkey and Sri Lanka – are currently at risk of a currency crisis, with a Damocles score above 100.

The Covid-19 pandemic has created new sources of vulnerability for emerging markets, Nomura said in a report.

Damocles generalizes many indicators, correctly signaling 64% of the last 61 crises. Of the 32 analyzed countries, 13 received less than 20 points, which indicates a very low risk of currency collapse. The Hungarian forint is one of the worst-performing currencies this year after the EU suspended billions of euros in aid to the country over corruption concerns.

The currencies of Romania and the Czech Republic also depreciated by more than 8% against the dollar.

Nomura’s warning is based on an analysis of eight indicators, including foreign reserve coverage, real short-term interest rates, fiscal and trade balance indicators.

Among the countries covered by the Nomura index are countries that have already experienced currency crises but are not yet out of danger, such as Egypt, Sri Lanka, Turkey and Pakistan.

The material was made with the support of the Rador agency.