Emerging Market Currencies

This Friday (24/1/2014), the 20 emerging market currencies customized index by Bloomberg fell to 90, the lowest level since April 2009. The Turkish lira fell to a record 2.3029 to a dollar while Ukraines hryvniz bank to a four year low. The south African rand fell to a low of 11 to a dollar for the first time since 2008. Argentina policy makers devalued the peso by reducing support in the foreign exchange market allowing to drop the most in 12 years to an unprecedented low.

Society generale SA strategist commented and I quote “The current environment is potentially toxic for emerging markets…You have two very troubling things; uncertainty about the fed policy combined with concerns about growth particularly in China”. Developing nation currencies sold off after report from HSBC that China’s manufacturing may contract for the first time in six months. Currencies from commodity exporting countries that depend on Chinese demand sank with rand dropping 1.1 percent. Since last year Argentine peso has dropped 37 percent in value against dollar while Turkish lira dropped 23 percent in spite of intervention

The Indian rupee plunged sharply to close at 62.68 against the dollar from 61.93 on the 22/1/2014. The weak economic data from China seems to be a forewarning of what is to come. Indian foreign reserve fell by 1.20 billion dollars for the week ended Jan 17, 2014 to $ 292 billion. The Sensex also fell by 240 points. If and when the US tapering of QE3 starts to gain momentum, combined with the current global deflationary tendencies one should expect the rupee to continue weekening in the months to come. It will be no surprise if the rupee reverts back to the low it touched on Aug 28, 2013 (1 USD $ = 68.3 Rs.). Recently Indian banks raised 34 billion dollars in the overseas market which has added significantly to our external commercial borrowing (debt). Much remains to be seen as to whether our exports are going to pick up in FY 2013-14 we read news item that Sonia Gandhi is favoring removing restrictions on gold imports. If it happens our import bill will continue to climb up.

As for depreciation of currency is concerned India is not alone. But our position is somewhat scary with the threat from the rating agencies.

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1 Response to Emerging Market Currencies

  1. theyenguy says:

    I have two comments:

    1) The fall in emerging market currencies has been quite dramatic; the driving factor has been the rise in the Benchmark Interest Rate ^TNX.

    Under the rule of the libertarian despised Creature from Jekyll Island, mankind experienced the Means of Economic Inflationism, that is the Benchmark Interest Rate, ^TNX, driving inflation in both fiat money, defined as Aggregate Credit, AGG, coupled with Major World Currencies, DBV, and Emerging Market Currencies, CEW, as well as fiat wealth, defined as World Stocks, VT, Nation Investment, EFA, and Global Financials, IXG, ever higher.

    But when the bond vigilantes gained control of the US Ten Year Note, ^TNX, calling it higher from 2.48, on October 23, 2013, fiat money died in a deflationary extinction event. Then fiat wealth died the week of January 24, 2014, as investors derisked out of debt trade investments and deleveraged out of currency carry trade investments, forcing World Stocks, VT, Nation Investment, EFA, and Global Financials, IXG, lower in another deflationary extinction event.

    The Benchmark Interest Rate, ^TNX, was the Means of Economic Inflationism, but after the pivotal event of October 23, 2013, it is now the Means of Economic Destructionism, establishing economic deflation and economic recession, terminating economic inflation and economic growth.

    2) Please consider that the dramatic fall in the emerging market currencies was of epic consequence; please consider that the week ending January 24, 2013, World Stocks, VT, and the US Dollar, USD, UUP, as well as Major World Currencies, DBV, and CEW, traded lower on the failure of trust, terminating liberalism and introducing authoritarianism, both as a paradigm and an age of regional governance and totalitarian collectivism.

    According to the Apostle Paul in Ephesians 1:10, Jesus Christ is the Operative Genius of the economy of all things, and through His dispensation, that is His administrative oversight for the completion of all things economic and political in every age. In the era of liberalism, He provided social mobility to the wily investor, to those successfully engaged in clientelism, and to a broad number of those lived as beneficiaries of debt trade investing and currency carry trade investing, under the Milton Friedman Free To Choose floating currency system which began in 1971 when President Nixon took the US off the gold standard to finance the Vietnam War.

    The subprime crisis led to the financial system crash of 2008; and it is likened to a fatal automobile crash that killed all the occupants. Regeneration of economic life came through Paulson’s Gift, that being Ben Bernanke’s QE1 and TARP, which traded out “money good” US Treasuries for Distressed Investments, such as those traded in Fidelity Mutual Fund FAGIX.

    Jesus Christ provided liberalism as an economic domain, that is a place for economic experience, where He rules in dispensation. It was trust in Ben Bernanke and his monetary policies, that began liberalism’s terminal phase as both a paradigm and age, where the investor and clients living in clientelism were the centerpiece of economic life, whose experience was shaped by floating currencies in a Zero Interest Rate regime.

    Economic life was through fiat money, defined as Aggregate Credit, AGG, and Major World Currencies, DBV, and Emerging Market Economies, CEW; but it died on October 23, 2013, when Jesus Christ opened the First Seal of the Scroll of End Time Events, and released the Rider on the White Horse, to effect a global economic and political d’etat, which terminated the Creature from Jekyll Island, and birthed the Beast of Revelation 13:1-4, which is rising to rule the world in the new economic domain of authoritarianism.

    Fiat wealth, defined as the output of economic life under liberalism, consisting of World Stocks, VT, Nation Investment, EFA, and Global Financials, IXG, died on January 24, 2013, with the failure of investor’s trust in the monetary policies of the world central banks monetary authority, and the collapse of freedom of choice provided by democratic nation state governance as is seen in numerous places such as the Ukraine.

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