At the start of 2008, emerging market currencies continued their appreciating trend. But that trend reversed suddenly in the second half of the year, as risk aversion gripped investors, and US companies repatriated capital to meet commercial paper maturities. By the end of the year, many emerging market exporters who had been hedging against further appreciation of their local currencies were reporting sometimes multi-billion dollar losses on their FX derivatives exposure. South Korean electronics firm Taesan LCD and Mexican supermarket chain Controladora Comercial were bankrupted, and India's Axis Bank now faces litigation from companies that lost up to $3bn on FX derivatives.
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