Emerging market currency sell-off accelerates

11 November, 2016

The emerging market currency sell-off has accelerated throughout trading in Asia on Friday, including the Indonesian Rupiah sinking to levels that prompted the Bank Indonesia (BI) to intervene and stabilise the market. While the Indonesian Rupiah has so far led the headlines after a plunge in currency value, the Malaysian Ringgit has also suffered from an extreme round of weakness and the offshore Chinese Yuan looks set to continue its course of hitting further historic lows against the Dollar.

While the declines seen in Asian currencies are being linked to the impact of trade throughout the continent if Donald Trump enforces protectionist trade policies, the return of expectations that the Federal Reserve will still raise US interest rates in December is strengthening the Dollar and also pressuring the emerging market currencies. If the Federal Reserve do not raise US interest rates in December as they have been preparing the markets towards for months following such a spectacular rebound in stocks after the victory by Trump, it will raise questions over credibility and concerns that they are worried about Donald Trump taking over office in January. 

There is also a prolonged threat to emerging market currencies that once Donald Trump completes his inauguration early next year that he will publically encourage higher US interest rates during the course of his presidential term. While the Federal Reserve is independent to any political party or government, the expectations that Trump will encourage faster monetary policy normalization is a real threat to the emerging markets.

Overall the combination between the initial response that fiscal stimulus encouraged by Trump should provide a boost to the US economy and also encourage increased interest rates in the United States should in theory result in projections that the Dollar Index could break the psychological level at 100. 

Source link  
More bad news for Sterling as EURGBP

Backlash - that would be the word used to sum up the investor reaction from the latest attempt by UK Prime Minister Theresa May to push forward her...

EURJPY sinks to flash crash levels

A wave of risk aversion engulfed global equity and foreign exchange markets on Thursday after Donald Trump accused China of breaking...

US corporate earnings to drive global stock markets

Asian stocks, excluding Japan, are mixed on Monday, even after US stocks posted new record highs following the United States GDP report released at...

Mixed US corporate earnings reaction

Asian equities fluctuated mostly into the red on Friday, following the trend seen in their US counterparts on Thursday. As the latest US corporate earnings...

Brexit stalemate deepens

The drama, confusion and sheer uncertainty over Brexit intensified yesterday evening, after British MPs rejected all eight options aimed at...

Brexit chaos deepens

The British Pound fell yesterday afternoon, after the House of Commons Speaker John Bercow essentially banned Theresa May's Brexit deal from getting a third vote.

Rand gains on GDP but outlook clouded

Buying sentiment towards Rand has unexpectedly brightened today after official reports showed South Africa's economic growth cooled during...

US-China trade deal, ECB meeting and NFP

Asian equity markets entered the trading week on a front foot, following news that the United States and China were close to a breakthrough deal that...

Fed patience adds to the Dollar woes

Will the Federal Reserve raise interest rates at all in 2019? This was a question even Fed officials were unable to answer, as the minutes from the FOMC’s January policy meeting revealed.


Share it on:   or