When is bad news in fact good news? Take the case of Argentina, where it is being argued, somewhat counter-intuitively, that the recession looming on the horizon could be the economic cure that the government needs.
Certainly, what has most been bothering the government on the economic front has been the alarming rate of decline of foreign exchange reserves over the past two years. But after a devaluation in January managed to stabilise reserves at around $28bn, they have risen slightly in April. Read more
Source: National Bank of Ukraine
Foreign currency reserves of crisis-hit Ukraine plunged $2.6bn in January, the country’s central bank revealed on Friday hours after introducing fresh capital controls that bankers warned could choke trade and boost black market business activity. Read more
Ukraine’s foreign currency reserves fell to $17.8bn at the end of January, down from $20.4bn at the end of December.
So the $3bn Ukraine received from Russia, it seems, has already been spent. With the next instalment of Russia’s proposed $15bn bailout held up indefinitely, it looks as though Ukraine is back to its default position of running out of hard cash. Read more
How well protected is Brazil against external shocks? Perhaps not as well as is commonly thought.
It has been a proud boast of Brasília for several years that it is a net creditor to the world because it holds more in foreign exchange reserves than it owes in overseas debt. However, it is far from clear that this is still the case. The issue is just one example of the vulnerabilities investors must include in their calculations of how Brazil and other emerging markets will fare as monetary policy in the developed world becomes less accommodating. Read more
At the beginning of September, the Indian rupee hit a series of record lows. Having appeared to be immune to global economic crises in the past, India was suddenly at the forefront of the troubles in emerging markets. And all eyes were on its external balances.
Taking the wheel at the central bank, the new governor, Raghuram Rajan (pictured), announced a new swap window to coax dollars into India. When the window closed at the end of November it had brought $34bn into the country in just three months – far more than most people expected. Read more
Rumours have been circulating for a while that capitalist bankers may be cooking up ways of helping cash-strapped, socialist Venezuela. Now details are emerging of how the Bolivarian Revolution is paying generous fees to get its hands on hard currency, without actually running up any new debt, or running down its reportedly-depleted foreign exchange reserves. Read more
When Ben Bernanke raised the prospect of a tapering of the US Federal Reserve’s monthly bond purchases in May, the impact on EM currencies was immediate: they slumped. By August, their decline in some instances was looking like a rout – the Indian rupee, especially, seemed on the brink of an all-out crisis.
But then something changed. Currencies around the emerging world began to recover. EM borrowers are once again tapping the hard currency bond markets. Big EM central banks, it seems, have seen off speculators: Brazil’s by intervening in currency markets, for example, Indonesia’s by raising rates. Has the EM story entered yet another new chapter? The answer, almost certainly, is “No”. Read more
Crunch time is fast approaching for Kiev. Central bank reserves have plunged deeper amid an already grim economic picture. And it could all get much worse if a trade row brewing with Russia escalates. Read more
The IMF’s 3-year $6.6bn loan to Pakistan has come just in time. As the FT reported, the loan may “stave off a balance of payments crisis, cheering investors concerned that foreign reserves had sunk to about six weeks worth of imports.”
Chart after the break. Read more
Kiev is bracing for a shaky autumn, hoping its finances and economy can hold up.
Figures this week reveal that central bank reserves continued their steady two-year decline, falling to $22.7bn, the lowest level since 2006, 7.4 per cent down year to date, and just below 2.7 months of imports (three months is considered the safe threshold). Read more
Let's take the whole lot
The latest leap in China’s forex reserves takes the total to $3.44tn. That’s more than the next four biggest stockpiles combined – in Japan, the eurozone, Saudi Arabia and Russia.
The number is so large that it’s hard to understand. So, to put things in perspective, beyondbrics went shopping. Read more
A fall in Egyptian foreign exchange reserves in January might have been expected, but not this big. The drop of $1.4bn to a 15-year low of $13.6bn, announced by the central bank late on Tuesday, pushes the country closer to economic collapse.
The December foreign exchange reserve levels of $15bn were considered sufficient to cover only three months of imports – which the central bank in December called “minimum and critical levels” – and if it wasn’t already, the necessity of securing additional foreign assistance is now urgent. Read more
By Rob Minto and Valentina Romei
The relentless rise in foreign exchange reserves in emerging markets isn’t so relentless after all. After years of accumulation, emerging markets are not stockpiling the dollars as they once were.
Currency depreciation worries, slowing exports, a possible end to the commodity supercycle – there are various reasons why overflowing reserves might hold less appeal. But some countries are bucking the trend. Chart of the week looks at which ones, and why. Read more
Could emerging market borrowers’ appetite for cheap developed world credit be finally easing?
A slowing of the huge growth in the EM’ foreign exchange reserves could point in that direction. So says Lars Pederson of fund manager Alliance Bernstein who says demand for foreign credit could be weakening because of concerns over possible local currency depreciation, worries about accumulated foreign debt holdings and a lack of suitable investment projects. Whatever the reasons, the easy money party is nearly over. Read more
Source: Egyptian Exchange
Egyptian president Mohamed Morsi’s brief honeymoon with the markets seems to be over.
Egyptian stocks, which rallied on his election only two weeks ago, plunged 4.5 per cent on Monday, wiping out nearly a third of the gains of the gains made since June 24 when Morsi was confirmed as the country’s first democratically-elected leader. Read more
Is the sky the limit for China’s foreign exchange reserves? Apparently not. After years of exponential growth, the towering pile of Chinese reserves may finally be close to hitting the ceiling.
Nomura has called the top: $3.68tn at the end of 2014, up from a mere $150bn at the start of 2000. China’s reserves will then start to decline, albeit gradually, in 2015. Read more
Hugo Chavez’s management of Venezuela’s economy may be a trifle unorthodox – to put it kindly – but there’s no doubting he has some competent technocrats on his economic team.
Whether the socialist leader pays any attention to his market-savvy advisers is another matter, of course, but this time it looks like he might have: the timing of a forthcoming debt issue could hardly be better. Read more
Some relief for Egypt’s battered foreign currency reserves, which have plunged 57 per cent since the start of the uprising to overthrow former president Hosni Mubarak last January.
Net reserves fell in February, down by $680m, but that’s a significant slowdown from the average $1.8bn monthly decline recorded in the five previous months. It raises hopes that the flight of hard currency from the troubled country may be slowing as the prospects rise of a deal with the International Monetary Fund. Read more
China has earned a reputation as a hypocritical investor over the past few years. It has repeatedly warned the US that quantitative easing was debasing the dollar, only to turn around and plough even more of its vast foreign wealth into dollar-denominated assets.
But perhaps those warnings weren’t so hollow after all. The latest data from the US Treasury suggests that China has in fact executed a major diversification away from the dollar. Read more
YPF dodged the bullet – for now – as Cristina Fernández, Argentina’s president, defied expectations and announced no investor-scaring moves to seize influence, control or even renatinalise the former oil monopoly.
Shareholders, who had seen millions wiped off their shares in recent weeks as prices fell off a cliff on the speculation that an investor-unfriendly move was in the offing, were rewarded with their highest rise in a decade – a 17 per cent bounce on Thursday, which followed Wednesday’s 15 per cent fall. Read more