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.


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Mingze Wu

Mingze Wu

Currency Analyst at Market Pulse
Based in Singapore, Mingze Wu focuses on trading strategies and technical and fundamental analysis of major currency pairs. He has extensive trading experience across different asset classes and is well-versed in global market fundamentals. In addition to contributing articles to MarketPulseFX, Mingze centers on forex and macro-economic trends impacting the Asia Pacific region.
Mingze Wu