Emerging markets continue to feel the strain

Currencies Direct January 27th 2014 - < 1 minute read

Emerging markets cntinue to
be the economic front line in the current market. Fed tapering is
driving capital flight and putting downward pressure on many
emerging market currencies. High profile examples of the overall
trend are the Argentine government who scaled back foreign exchange
controls over the weekend because of a lack of reserves to defend
the peg.  Likewise the Turkish Lira is down over ten per cent
against the US dollar in the last month and the South African Rand
is close to its weakest level in more than five years after talks
to end the strikes at platinum mines look set to resume this
morning.

Adding to the overall jitters in the market were reports from
overnight that the
PBOC
has ordered a three day suspension of domestic renminbi
transfers because of “system maintenance”. The announcement majorly
spooked an already nervous market but the article has now been
taken down after further clarification from the central bank
suggest such maintenance was normal over the Chinese holiday
period. Nevertheless, we can expect safe-haven assets to continue
to grind higher in  trading today so the dollar and yen are
likely to remain on Friday’s uptrend.

Data today is light on the ground, with the highlights German
IFO business climate figures due at 9am and expected to show a
small increase in business conditions from last month. Later today
US new home sales are released and are expected to reveal a modest
drop from last month but in line with an increasingly robust
housing market.


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