EM currencies sell-off

If the recent recovery in emerging markets has calmed your nerves somewhat, then steel yourself: EM crises are here to stay. That’s according to Joseph Capurso, currency strategist at Commonwealth Bank of Australia.

The good news? EM crises don’t always mean a regional or global recession. In fact, they are rather common, and their impact can be limited. So here are the five facts you need to remember in the next EM crisis (which should be rather soon, in fact). Continue reading »

Raghuram Rajan, governor of the Reserve Bank of India, accuses policy makers in the developed world of lacking co-ordination. But how do EM central bankers stack up and how will their behaviour shape investment decisions?

“You have to be selective this year,” says Michael Ganske, head of emerging markets at Rogge Global Partners, a fixed income fund with $59bn under management – and the selection process begins with an assessment of a country’s economic fundamentals and the credibility of its financial policy makers.

With that in mind, here is a beyondbrics rundown of the guiders, the reactors and the mavericks at key EM central banks currently battling turmoil on financial markets. Continue reading »

Forint hits 2-year low to the dollar

That’s the forint over the last three years to the euro. On Friday, it came under renewed pressure as seveal other emerging market currencies stabilised after a week of turmoil. Continue reading »

Currency markets like rate rises. But half-hearted central bankers, or those without political support, can easily be overwhelmed by currency traders. James Mackintosh, investment editor, explains why India has succeeded where Turkey and South Africa have failed.

What a difference a mountain range makes. To the east of the Andes, Argentina is in the throes of an old fashioned, disorderly devaluation, in which authorities scramble to plug every leaking channel of hard currency flows until at last they are carried off in the flood. To the west, Chile’s authorities are looking on with calm equanimity as their currency gently subsides to its own level.

What is it, other than snow-capped peaks, that unites and separates their two worlds? Continue reading »

Ah, the heady days of the rand at 10 to the dollar. Back only in June last year, that was the big psychological market barrier. Now 11 rand per dollar is the norm. Only a few weeks ago analysts had doubts that it would get that far – in November, Barclays suggested the rand could even strengthen back to 10.

Rip all that up. With the Argentine peso, Turkish lira and Russian rouble all posting big falls in recent days, the rand is just one of several emerging market currencies under pressure. So what are the implications of the rand at 11? Continue reading »

Did the Argentine peso’s 10 per cent tumble on Thursday bring it closer to the country’s black market exchange rate? Surely a devaluation of that magnitude would help nudge the official peso rate closer to the black market reality?

Perhaps not. As the following charts show, the official rate is still well off the black market rate – known as the “blue dollar” rate, suggesting further pressure on the official peso to depreciate. Continue reading »

Previously, beyondbrics looked at stock exchange winners and losers of 2013. Now it’s the turn of the EM currencies.

Which currencies felt the full force of the 2013 sell-off, and which survived unscathed? Continue reading »

As Christmas approaches in London, flutter-hungry bookies start taking bets on the likelihood of snowfall.

Are EM currency falls this month a safer bet?

Benoit Anne of Société Générale has crunched the numbers and found that EM currencies tend to lose value in December, to a greater extent than the yearly average. Continue reading »

For those of you who – like Lewis Carroll’s Alice – have a liking for pictures, McKinsey’s study on the effects of QE is worth a read.

It categorises in great detail the true consequences of Ben Bernanke’s decision to buy trillions of dollars in government debt and other securities, and the result of reining this programme in. Continue reading »

In biits

Five EM countries are regularly trotted out as being most at risk of a currency crisis: Brazil, Indonesia, India, Turkey and South Africa.

Their currencies fell by between 13 per cent and 23 per cent between May and August this year (before recovering somewhat in most cases).

But a new index from Nomura makes a mockery of the distinction between the Fragile Five Biits – as the five have been dubbed – and the rest. Continue reading »

Cast your mind back, if you can, to Black Wednesday in 1992, when the UK lost billions trying to prop up the pound before being forced to withdraw from the banded exchange rate system known as the ERM.

It seems the lesson of (not) using reserves to prop up your currency in a crisis has been heeded by EM policy makers. The EM currency carnage of August may have been a big shock but it didn’t spark panic spending of forex reserves by central banks. When it comes to exchange rates, after all the talk of currency wars, there seems to be a new mantra of “what will be, will be”. Continue reading »

As the G20 kicks off in St Petersburg, one of its dominant themes is a rising swell of complaints over the effects of US monetary policy.

Simply put: the US tapers quantitative easing, and the days of easy money for emerging markets are over – and currencies get hit. So who’s complaining, and how bad has it been? Continue reading »