What of Latin America and Asia
The currency war is back.
Since last week when the Fed started its third round of money-printing (QE3), policymakers in emerging markets have been busily talking down their own currencies or acting to curb their rise,http://www.moncleroutlettitalia2012.com/. These efforts may gather pace now that Japan has also increased its asset-buying programme, with expectations that the extra liquidity unleashed by developed central banks will eventually find its way into the developing world.
The alarm over rising currencies was reflected in an unusual verbal intervention this week by the Czech central bank,http://www.airjordanpascherrfr4.com/, with governor Miroslav Singer hinting at more policy loosening ahead, possibly with the help of unconventional policy tools. Prague is not generally known for currency interventions — analysts at Societe Generale point out its last direct interventions were conducted as far back as 2001-2002. Even verbal intervention is quite rate — it last resorted to this on a concerted basis in 2009,doudoune moncler, SoGen notes,Moncler Outlet. Singer&rsquo,Moncler;s words had a strong impact — the Czech crown fell almost 1 percent against the euro.
The stakes are high — the Czech economy is a small, open one, heavily reliant on exports which make up 75 percent of its GDP. But Singer is certainly not alone in his efforts to tamp down his currency. Turkey’s 100 basis point cut to its overnight lending rate on Tuesday (and hints of more to come) was essentially a currency-weakening move. And Poland has hinted at entering its own bond market in case of “market turmoil”
What of Latin America and Asia, the main battlegrounds for currency wars of the past? As may be expected, Brazil has been the most vocal in its criticism of the Fed — its finance minister Guido Mantega (who first came up with the currency wars phrase) has threatened more measures to keep a “devalued real” . The central bank has already sold billions of dollars worth of reverse currency swaps to weaken the real this week,air jordan. Neighbouring Peru on Tuesday waded into currency markets to weaken the sol, saying the central bank was trying to get in ahead of an expected wave of inflows. In Asia, central banks from the Philippines and Taiwan have been spotted buying dollars to weaken their currencies while Korea will almost certainly cut interest rate to curb its won which is near six-month highs to the dollar.
All that sounds pretty familiar,nike air jordan. But are emerging economies really that worried? And should they be?
A competitive currency looks even more desirable now than two years back, given that global trade and exports are in the doldrums. But it’s pretty clear to all that no matter how much QE the Fed does, emerging currencies — and economies — do not look as attractive a bet as they did back in 2010 (see for an article on this),jordan pas cher. Already the post-Fed currency rally has run into trouble as new worries surface over the euro zone. China’s reluctance to emulate the Fed with its own stimulus programme is also dampening sentiment,Moncler Outlet.
The Fed's QE3 move and Japan's decision to start yet another round of asset buying may have re-ignited another round of the global currency wars. Emerging policymakers are already ramping up the rhetoric.