Rate Hikes Needed To Relieve Pressure For Emerging Markets Currencies

Turkey’s central bank appears set to use its emergency meeting to hike rates and the Reserve Bank of India surprised the market with an increase, but it isn’t clear whether other emerging markets will follow suit as their currencies face another market spasm.

“The classic response if you’re a central bank and your currency is getting hit is to get ahead of the market and overperform,” Paul Gruenwald, chief economist for Asia Pacific at Standard & Poor’s, told CNBC. “The worst case scenario is you’re sort of chasing your tail and the market’s going after you so you’ve got to get out in front.”

Many emerging markets have seen their currencies take another hit in the latest selloff, partly due to concerns over the Federal Reserve’s moves to taper its asset purchases. After the Fed cut it asset purchases by $10 billion a month to $75 billion in January, markets are closely watching whether there will be further tapering announced when the latest meeting concludes on Wednesday.

CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.