30 Jan 2014
Flash: Fed taper placing Emerging Markets under downward pressure - BTMU
FXstreet.com (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ notes that emerging markets are coming under pressure, as the US aims to normalise monetary policy.
Key Quotes
"The ongoing normalization of monetary policy in the US is continuing to place emerging market currencies under downward pressure and leading to higher local interest rates. Investor sentiment towards emerging markets remains fragile in the near-term."
"The Reserve Bank of South Africa unexpectedly followed the Reserve Bank of India and Central Bank of Turkey yesterday by raising their key policy rate by 0.50 point to 5.50%. Upside risks to inflation from rand weakness prompted the earlier than expected SARB rate hike. The SARB now expects the annual rate of headline inflation to peak at 6.6% in Q4 2014 and average just above the top of their target range of between 3.0% and 6.0% during 2014."
"It suggests that their key policy rate will likely have to be raised further given that after adjusting for inflation it still remains in negative territory. The rand already appears increasingly undervalued although may still undershoot further helping economic rebalancing in South Africa."
Key Quotes
"The ongoing normalization of monetary policy in the US is continuing to place emerging market currencies under downward pressure and leading to higher local interest rates. Investor sentiment towards emerging markets remains fragile in the near-term."
"The Reserve Bank of South Africa unexpectedly followed the Reserve Bank of India and Central Bank of Turkey yesterday by raising their key policy rate by 0.50 point to 5.50%. Upside risks to inflation from rand weakness prompted the earlier than expected SARB rate hike. The SARB now expects the annual rate of headline inflation to peak at 6.6% in Q4 2014 and average just above the top of their target range of between 3.0% and 6.0% during 2014."
"It suggests that their key policy rate will likely have to be raised further given that after adjusting for inflation it still remains in negative territory. The rand already appears increasingly undervalued although may still undershoot further helping economic rebalancing in South Africa."