The fate of Ukraine’s hryvnia currency hangs by a thread. Will that thread break?
The hryvnia’s crawling peg has so far held as the central bank has dipped steadily into its reserves to support it. But the reserves are dwindling and political unrest is growing. Forwards markets are therefore betting on quite a sizeable depreciation (See graphic below from brokerage Exotix).
LONDON, Dec 5 (Reuters) – Dollar bonds issued by Ukrainian
companies back in the easy-money times are taking a hit on
doubts over the country’s solvency and fears that a currency
devaluation or capital curbs might propel firms into default.
Mass protests against the government’s decision to spurn a
cooperation deal with the European Union in favour of closer
ties with Russia are inflicting more damage on an economy
already in recession. And unless external aid
materialises, the central bank, with just $20 billion in hard
currency reserves, may struggle to hold the hryvnia’s peg to the
LONDON (Reuters) – As the political crisis in Ukraine continues, its severely depleted central bank reserves are putting it at serious risk of a balance-of-payments crunch, its metrics looking worse than almost every big emerging economy.
With demonstrators blockading government buildings in protest at President Viktor Yanukovich’s rejection of closer ties with the European Union, the creaking economy is coming under growing pressure.
LONDON (Reuters) – As a decade’s worth of easy foreign money starts to ebb away from emerging economies, their governments are renewing efforts to deepen domestic savings pools – even if change is painfully slow.
The volatility prompted by signs of an eventual turn in U.S. monetary policy has not only underscored emerging markets’ reliance on foreign capital, but also sounded a fresh warning: that without a significant home-grown investor base, countries risk a return to the old boom-bust cycles of the 20th century.
LONDON, Dec 2 (Reuters) – As a decade’s worth of easy
foreign money starts to ebb away from emerging economies, their
governments are renewing efforts to deepen domestic savings
pools – even if change is painfully slow.
The volatility prompted by signs of an eventual turn in U.S.
monetary policy has not only underscored emerging markets’
reliance on foreign capital, but also sounded a fresh warning:
that without a significant home-grown investor base, countries
risk a return to the old boom-bust cycles of the 20th century.
A perfect storm seems to be brewing for the Russian rouble. It has tumbled to four-year lows against a euro-dollar basket. Against the dollar, it has lost around 7 percent so far this year, faring better than many other emerging currencies. But signs are that next year will bring more turmoil.
While oil prices, the mainstay of Russia’s economy, are holding up, Russian growth is not. It is running at 1.3 percent so far this year and capital outflows continue unabated — $48 billion is estimated to have fled the country in the first nine months of 2013 compared with $55 billion in 2012. Russia’s mighty current account surplus has shrunk to barely nothing and could fall into deficit by the middle of next year, reckons Alfa Bank economist Natalia Orlova. Finally, the rouble can no longer count on the central bank for wholehearted day-to-day support. FX market interventions cost the bank $3.5 billion last month but it also shifted the exchange-rate corridor upwards six times, indicating it is keen to move to a fully flexible currency.
By Shadi Bushra
Yet another sign of the growth convergence between developed and emerging markets. Two of the “BRIC’ countries have dropped out of the Top-30 in a growth index compiled by political risk consultancy Maplecroft, while several Western powerhouses have nudged their way onto the list.
Maplecroft’s 2014 Growth Opportunities Atlas showed that Brazil and Russia — the B and R of the BRIC bloc — had dropped 26 and 41 places, respectively – due to slow economic reforms and diversification. The United States, Australia and Germany meanwhile broke into the top 30 on the index, which evaluates 173 countries on their growth prospects over the next 20 years.
LONDON, Nov 27 (Reuters) – Greek stocks made their trading
debut on MSCI’s emerging equity index on Wednesday after a
12-year gap, rising 1 percent on the back of European gains,
though broader emerging stocks were subdued after mixed U.S.
Earlier in Asia too the picture was mixed, with Chinese
shares rallying but the Indonesian and Thai currencies extending
losses, the latter hit by political turmoil and an unexpected
interest rate cut.
LONDON, Nov 25 (Reuters) – Turkey’s stock market surged 1.6
percent on Monday after Iran sealed a historic nuclear deal with
the West read as reducing political risk in the oil-producing
Middle East and opening the door to more trade with one of the
region’s biggest countries.
While emerging markets were generally firmer, political
tensions weighed on Thai and Ukrainian assets, and oil’s 3
percent dip pushed the Russian rouble lower.
LONDON (Reuters) – Once a source of rich returns for yield-hungry investors, emerging markets are hammering home a long-ignored truism: banking on currency strength to enhance returns on stocks and bonds is not a one-way ticket to profits.
Currencies such as the rupiah and lira have slumped 10-20 percent this year as a seismic shift in global capital flows rattles even relatively robust markets, exacerbating international investors’ losses on the underlying assets.