With the US Federal Reserve clearly committed to its tapering program, opting to reduce its purchases by another $10 billion earlier this week, the yield on the 10-year Treasury has risen nearly a full percentage point. That’s created a huge surge in emerging market currency volatility, as dollars flow out of those markets and come back home.

Rather than stand by and allow the situation to grow worse, several global central banks have parried against those flows, with rapid fire interest rate increases around the world in recent weeks. Turkey alone has experienced a nearly 30 percent decline in the value of its lira, prompting its central bank to boost its one-week repurchase rate from 4.5 percent to 10 percent, its overnight borrowing rate from 3.5 percent to 8 percent and its overnight lending rate to 12 percent from 7.75 percent. We’ve seen similar hikes from Argentina to South Africa and India.

While the rate hikes haven’t halted the emerging market currency declines, they have at least slowed the slide. But how will these moves impact US investors? The effects are broad, changing the calculus on both stocks and bonds in the US and overseas.

On the equity side of the equation, higher interest rates will slow the growth of credit and the economies in those countries. Higher rates discourage borrowing, slowing local economic growth particularly if inflation isn’t a major a concern, something which is true in most of these countries so far. Inflation in Turkey has been running at 7.4 percent, a relatively tame rate for that country, and has come down to 6.6 percent in India.

At the same time, while higher rates may help to stem capital flight, over the long run US investors likely won’t see a huge benefit from them as long as the currencies continue to depreciate. Higher rates don’t mean much if you still end up with fewer dollars in your pocket than you could make at home.

A stronger US dollar vis-à-vis emerging market currencies also isn’t particularly lucrative for American companies doing business in those countries. A weaker local currency translates to fewer dollars, potentially denting any profits earned in that country.

Thankfully, though, this situation isn’t likely to fester into a full-blown currency crisis such as we experienced in the mid-1990s.

For one thing, emerging market central banks have much more flexibility to address the problem than they did two decades ago. Back then, the majority of those bonds were dollar denominated. Today, more than 60 percent of the $2.66 trillion in emerging market debt outstanding is denominated in local currencies. Only about 15 percent of that which isn’t issued in local currencies is US dollar denominated, as those countries have moved to issuing debt in everything from euros to yen.

There are also fewer countries using fixed rates or pegs to keep their currencies competitive. In the days before currencies were allowed to float, it was relatively easy for traders to stage organized moves against weak currencies and force central banks to make large devaluations and generate big profits.

Emerging market economies are also much less leveraged that they were in the 1990s; many are actually in better shape than their developed market peers.

While the average government-debt-to-GDP ratio in the developed world is currently running better than 100 percent, in the emerging market the average is close to 40 percent. And while most emerging market debt was rated little better than junk 25 years ago, today about 83 percent of it is investment grade.

Because of the growth of domestic industry, emerging market economies are also importing less than they were decades ago and borrowing less from abroad, hence the growth of local currency denominated bonds.

Foreign exchange reserves have also generally been growing, with countries ranging from Mexico and South Korea to Indonesia and China accumulating cash hoards in recent months.

Some weaker countries will undoubtedly get hit—Turkey is a prime example, because it was already suffering from both economic and political troubles. Nonetheless, there seems to be relatively little risk of an emerging market crisis or contagion this time around. Economic growth will slow due to the interest rate hikes, but most emerging market countries are drawing lessons learned from the 1990s to avert a full-scale panic. That’s why investors in emerging markets shouldn’t panic, either.

Portfolio Update

Fourth quarter earnings at Keppel Corp (OTC: KEPLY) were up by 9 percent on a record-setting number of rig deliveries and better margins.

Revenue in the quarter was up 20 percent year-over-year to SGD3.6 billion, while net profit came in at SGD332 million. All segments reported growth except infrastructure.

Full-year earnings totaled SGD1.412 billion, 26 percent off last year’s earnings due to the one-off of unit sales at Reflections at Keppel Bay in 2012. Revenue for the year was 11 percent lower at SGD12.4 billion. Earnings per share for 2013 were SGD0.782 cents versus SGD1.07 last year.

The company delivered 21 new offshore oil rigs in 2013, a new record for the most number of rig deliveries by a single company in a year. With a full order book through 2019, Keppel should continue leading the way in rig construction, particularly once its Mexican construction yard is up and running.

While the company’s infrastructure division will likely continue to lag, its rig business should more than compensate as the pace of offshore oil drilling picks up.

Continue buying Keppel Corp up to 20.