- Who’s afraid of a big current account deficit?
- What is the CAD?
- What if there was no capital account?
- Should we bemoan the large Indian CAD?
- A big CAD got us into trouble in 1991. Won’t that happen again?
- Why won’t all channels choke all at once?
- What kinds of foreign investors respond the most to rupee depreciation?
- Why is a large CAD seen as a big problem?
- What is the role of MOF or RBI in ensuring adequate capital comes into the country to match the CAD? Continue reading “The Current Account Deficit of India (CAD)”
NEW HAVEN – The global economy could be in the early stages of another crisis. Once again, the US Federal Reserve is in the eye of the storm.
As the Fed attempts to exit from so-called quantitative easing (QE) – its unprecedented policy of massive purchases of long-term assets – many high-flying emerging economies suddenly find themselves in a vise. Currency and stock markets in India and Indonesia are plunging, with collateral damage evident in Brazil, South Africa, and Turkey.
The Fed insists that it is blameless – the same absurd position that it took in the aftermath of the Great Crisis of 2008-2009, when it maintained that its excessive monetary accommodation had nothing to do with the property and credit bubbles that nearly pushed the world into the abyss. Continue reading “The Next Global Crisis could be in Formation”
The Indian Rupee has depreciated significantly against the US Dollar and reached record lows last week. Why is this happening and what does this signify? This post talks about the dynamics of the rupee and reviews probable reasons for this depreciation.
Exchange rate for any currency pair is determined by the buying and selling pressure of the respective currency with respect to the other. If the market does not think positively about a currency then there is a downward pressure on that currency. The movement of rupee from 1991, when India changed from a fixed rate system to a managed floating rate system has been a roller coaster ride. Continue reading “Rupee @60 The Rollercoaster ride”
The Rupee’s as you know has its historic low – 58.84. Exporters see this as an opportunity to make India the world export powerhouse by de-bottle-necking manufacturing infrastructure. Were as the weaker currency makes imports costlier, especially of foreign oil on which India heavily relies, and will stoke already high consumer inflation.
Let’s try to explore the reason behind the free fall:
1) Dollar Trading at 3 Year High : USD is trading at 3 year high at 84.3, US stock market are at life time high, Strength in USD indicating recovery in US economy. Housing market is recovering. Job situation is improving which makes market participants believe the US fed will be tapping the QE infinity. Continue reading “The Rupee Free fall and the reasons”
There is a terrible irony in export-dependent nations being viewed as “safe havens.” Their safe haven status pushes their currencies higher, which then crushes their export sector, which then weakens their entire economy and stability, undermining the very factors that created their safe haven status.
As long as Germany stays within the Eurozone, Japan is the primary example of this dynamic. Should Germany leave the euro and return to its own currency, it too will begin orbiting Continue reading “Export Lead Economies & trouble in domestic currencies”