Expert Zone

Straight from the Specialists

Why the Fed is not worried by emerging market moves

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

Several emerging market central banks have been forced to react to market events already this year. Interest rate increases in India, Turkey and South Africa followed bond or currency market volatility. Argentina has endured dramatic moves in its currency, and Brazil has been forced to tighten policy.

The moves in these markets, unlike those of 1997-1998, do not suggest a systemic threat to all emerging markets. Investors have distinguished markets where errors in fiscal policy, monetary policy or political risk created a fundamental mispricing. Such errors are generally most visible in a current account deficit or a government budget deficit, or both.

The prospect of rising global bond yields has offered investors alternative investment opportunities to these troubled countries, with fewer risks. Countries that have followed a more orthodox policy approach, and have generous foreign exchange reserves and current account surpluses or equilibrium have been less threatened.

Rupee should not harden further

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The rupee has recovered over the past few weeks after falling to a record low of 68.85 per dollar in August. After a period of unease, the finance ministry and the Reserve Bank of India can now take it a little easy. But care needs to be taken that the rupee is not driven up further.

Speculation about the end of the U.S. Federal Reserve’s bond-buying programme in May affected global currencies and the rupee was not alone in this predicament. The announcement had created a scare about the tapering of quantitative easing. That would have dried up liquidity that the market had got used to. The Brazilian real, Indonesian rupiah, and the Indian rupee were the principal losers.

Asian financial crisis and lessons for India

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Several economists have gone to great lengths to say that India in 2013 is not facing a repeat of the 1991 balance-of-payments crisis or the Asian financial crisis in 1997. Clearly, the crisis India faces now is unique – as most economic crises usually are.

That does not mean there is nothing to be learnt from past crises. We believe there are several similarities between the Asian one and India’s situation today.

Why the rupee is linked to jobs in the U.S.

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

It appears odd that an increase in job offers in the United States should pull the rupee down in India. After all, any improvement in the U.S. economy should benefit the rest of the world. It means an increase in imports by the U.S. and exports by other countries. But there is more to it than that.

Where the rupee is headed after 60

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(Rajiv Deep Bajaj is the Vice Chairman and Managing Director of Bajaj Capital Ltd. The views expressed in this column are his own and do not represent those of Reuters)

A sharp fall in the Indian rupee seems to have taken the markets by surprise. In just over 45 days, the rupee depreciated by 10.5 percent against the dollar to 60.7 (June 26) from 54.35 (May 9).

Making the most of a mini-crisis

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

It all looked promising at the beginning of the year: the Indian rupee, like other Asia ex-Japan currencies, was appreciating against the dollar, to an extent on par with the Chinese yuan and just behind the Thai baht and Malaysian ringgit. Then came chatter in early May that the Federal Reserve was near gradually ending its money-printing program. The selloff in the rupee was rapid, and the currency lost more value than most of its Asian peers.

On Wednesday, Federal Reserve Chairman Ben Bernanke said the central bank will begin slowing the pace of its bond-buying stimulus later this year, triggering a global selloff that sent the rupee crashing to a record low on Thursday morning.

Will the rupee fall further?

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

On May 31, the rupee fell to an 11-month low of 56.51 to the dollar. It wasn’t the only currency to suffer a loss. Most currencies depreciated during the month; some more than the others.

The appreciation of the dollar reflects an improvement in the performance of the U.S. economy and partly the related possibility of the phasing out of quantitative easing (QE) by the U.S. Federal Reserve. The latter would make the dollar even scarcer.

India’s current account deficit: solution lies in exports

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The U.S. dollar is the major currency for international trade. Most countries use it to pay for their imports and also peg the dollar for exporting products and services.

The balance of trade (net import or export) would determine if a country is a net payer or a receiver of dollars. Trade, along with other dollar inflows (portfolio/FII, FDI, inward remittances), determines the overall availability of the international currency for a country to engage itself in the global economy. This also has a bearing on determining the exchange rate of a country’s own currency with that of the dollar.

Where will the rupee finally rest?

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

For nearly a decade, the rupee has been stable — moving in the narrow range of 44-45 to the dollar. But since August last year, the rupee began to slide and in less than six months was down 23 percent.

Why the rupee should harden

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

The rupee has been uneasy and the stock market nervous since the beginning of this year. The two are not unrelated. For, the fall of the market has been due to absence of FII investment which also deprived the currency market of dollar supply. The outflows more or less matched the inflows and the rupee, with corresponding fluctuations, ended up in August where it had started in January.

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