31 Jan 2014
Flash: India should avoid EM temptation of damaging capital controls - FXStreet
Craig Drake, FXStreet FX Analyst believes that while there have been some quick to call the end of emerging market volatility, it is likely that the fall out from G10 monetary policy is going to be a running theme of 2014.
Key Quotes
“As the Fed moves into a period of relative tightening, this week announcing a second round of quantitative easing tapering, developing economies are looking down the barrel of currency depreciation as capital flows from low-yielding G10 economies into higher-yielding emerging markets slow.”
“RBI governor Rajan is not alone in bearing the brunt of global currency wars, but if he follows the herd and takes the easy short term option of meddling in his currency and clamping down on free markets, he will be more culpable for damage inflicted on the Indian economy than the Fed policymakers he currently points the finger at.”
Key Quotes
“As the Fed moves into a period of relative tightening, this week announcing a second round of quantitative easing tapering, developing economies are looking down the barrel of currency depreciation as capital flows from low-yielding G10 economies into higher-yielding emerging markets slow.”
“RBI governor Rajan is not alone in bearing the brunt of global currency wars, but if he follows the herd and takes the easy short term option of meddling in his currency and clamping down on free markets, he will be more culpable for damage inflicted on the Indian economy than the Fed policymakers he currently points the finger at.”