Emerging market currencies may be reaching crisis point
Adds chart
July 1 (Reuters) -Emerging market currencies may be reaching crisis point as the extreme weakness of a growing number of them sparks risk aversion that undermines other asset markets and fuels more demand for dollars.
Currencies falling this year toward record lows include those that are heavily managed, such as China's yuan and India's rupee. Even with huge resources at their disposal the central banks of these nations haven't stopped their currencies from slumping.
For nations that have fewer resources to influence currencies - especially for lesser-traded currencies, which is basically every other emerging currency - the risk of an even quicker dollar rise is growing.
This could happen soon, and may well be led by USD/CNH trading to and beyond its current record high. While China, which has over three trillion dollars in reserves, can more effectively manage its currency, other nations may struggle to halt drops without huge increases in interest rates that hurt economies.
At the moment only Turkey has hiked its interest rate significantly, and while this has slowed the lira's decline, it has not stopped it.
In contrast, some emerging nations are intent on easing monetary policy when little change is seen for the U.S. interest rate in the near future. This will add fuel to the fire of currency moves only previously seen during a crisis, with an increasing number of less liquid and riskier currencies falling into uncharted territory this year.
For more click on FXBUZ
CNH and extreme weakness of other Asia currencies https://tmsnrt.rs/3KYuE9S
(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
</body></html>Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
