hot money

Hot money are two words that would usually make central bankers cringe. Not in Nigeria though.

Even as foreign inflows into the country hit a two-year high in January, the central bank said it was not concerned about the risks arising from this potentially volatile influx – though that might change if flows continue to grow at their current pace. Read more

If there were any fears that the EM assets boom seen over the past year – particularly in fixed income – could peter out as valuations get stretched, they have been more or less put to rest by Ben Bernanke’s latest actions. The chairman of the US Federal Reserve on Wednesday announced another round of monetary easing, a move that will add to the flood of hot money that has been making its way to EM assets. Read more

Uruguay prides itself on being an open, investment-orientated economy. So what is it doing imposing capital controls? Trying to deter hot money – aka short-term capital inflows — is the answer.

The central bank says foreign participation in tenders of central bank debt has been “unusually high” in recent months. Though it recognised that that was proved the success of Uruguay’s investment-friendly policies that have led to investment-grade status and high interest rates, it called the phenomenon “a challenge for the management of domestic macroeconomic stability”. Read more