Argentina flap butterfly wings Emerging economies
are in a floating rate of ruin
The federal reserveInterest rates on the same day, the Argentine government announced to cancel capital controls, allowingThe exchange rateFree floating, the peso was its biggest one-day drop, azerbaijan also followed, on December 21, azerbaijan, the central bank announced to cancel the pegged currency manerThe dollarExchange rate mechanism, the implementation of freely floating exchange rates.
Why Argentina floating exchange rate through regression, flap the wings of a butterfly?After the federal reserveIncreases in interest ratesIn the era ofEmerging marketsMonetary outlook concern.
Argentina's new government to save the tottering economy
On December 17th, the federal reserve to raise interest rates on the same day, the Argentine government announced the end of four-year capital controls, allowed to float freely.The peso fell, days after the biggest drop is as high as 41%, eventually closed down 29%.
Argentina's finance minister guillaume, cancel the foreign exchange control will be conducive to enhance profit of import and export trade, attract foreign investment, promote employment, to recover the normal order of financial market, and increase the international market and investors for Argentina's economic confidence.On December 14, Argentina has canceled wheat and corn export taxes, soy export tax cut from 35% to 35%.15, but also greatly improve the short-term fixed-rate, prevent inflation.Argentina has frequently action aims to save the economy stalled.
Because the debt crisis in the past few years, Argentina, the substantial depreciation of currencies have been round, bond markets close to collapse.Its current fiscal deficit accounted for 7% of its GDP, for 1982 years the biggest proportion, inflation close to 25%, foreign exchange reserves are in the line edge.As of December 15, Argentina fell to $24.282 billion in foreign exchange reserves, a new low since June 2006.
The insiders say,such as Argentina relatively rely on a single product export countries,commoditiesDecline, its growth momentum, monetary, reserves will be under great pressure.But he also said, the trade surplus, foreign reserve, Argentina situation can not analogy to other emerging economies.
The personage inside course of study also told our reporter, each roundThe United StatesRate cycle, big emerging economies will bear the pressure of capital flight and currency devaluation, if the central bank, government intervention in currency markets, the cost will be rising, and excessive consumption of foreign exchange reserves.It's not only in emerging economies, previouslyThe Swiss francAlso because ofThe euroThe falling, abandon pegged to the euro, a day to rise by 40%."These practices is big in order to better cope with the dollar rate cycle, adopt floating exchange rate system as soon as possible, to the economy itself and
the central bank to maintain exchange rate stability in terms of cost, it is a better choice."She said.
And the next is the key to Argentina's central bank will be able to avoid exchange rate to fall further, appear even unpredictable crash.Experts predict that to Argentina's currency stable at least $20 billion.
In fact, the new President down after winning the election on November 22, the finance team has been working to increase the dollar reserves, in response to market demand, after the cancellation of foreign exchange control to prevent excessive devaluation of the peso to 1: $15.
Last week, with China based on 2014 a total of 70 billion yuanThe yuanThe bilateral currency swap agreements, Argentina has put $3.1 billion reserve assets for the yuan to the dollar, in dollars into reserves earlier this week.In addition, Argentina also plans in the coming weeks from international Banks and other ways to raise $15 billion to $25 billion.
So far, Argentina has not yet been formally announced after the cancellation of foreign exchange control specific official exchange rate and time of the new official rate.But guy, according to new official exchange rate is expected to be the same as the black market rate.By the 16th of this month, the official exchange rate is 9.9 pesos for 1 dollar, Argentina black market rate is 14.5 pesos for 1 dollar.
Argentina's former economy minister in March, said: "its currency is expected to won't have big downward pressure in the short term, markets have been melted down expectations."Barclays analysts predict that Argentina's currency devaluation to $1 to 15 pesos, inflation will rise to 47% in the first half of 2016.
As of yesterday, our reporter went to press, the Argentine pesos for dollars is 12.80, the peso picked up a few days ago, but still 23.5% depreciation before a floating exchange rate.
Argentina flap butterfly wings repeat of the Asian financial crisis?
Although Argentina the floating exchange rate system is its attempt to normalize their economic part of a series of policies, but not reminiscent of the Asian financial crisisThailand, as early as September, Goldman sachs has reported, Latin American countries is repeating itself in 1997 Asian financial crisis, the history of 18 years may be "yesterday once more".
This year, overseas media analysis reports, at least four countries peg to the dollar exchange rate policy is to give up, and another six were weakened, for developing countries to the fall in commodity prices, a slowdown in China and the United States to raise interest rates to adjust the new era.Policymakers have found that to maintain a pegged exchange rate and export competitiveness eroded and decline in foreign exchange reserves as the price can't bear.
On Monday, followed the pace of Argentina, the former Soviet union countries azerbaijan also announced that due to external shocks, measures must be taken to keep the balance of international payments, to keep its foreign exchange reserves on the key level, and ensure the competitiveness of the economy, from now on, cancel the maner currency's peg to the dollar since 2011 years of exchange rate mechanism,
the implementation of freely floating exchange rates.Maner, immediately straight dive to 1.55 against the dollar, its lowest level since 1995.
Prior to that,RussiaAnd kazakhstan has successively announced the implementation of free floating exchange rate, and RussiaRossThe rouble, plunging by 10% on December 15, at its biggest one-day drop since 1999;Kazakhstan into 3 months to depreciate nearly 40%;South Sudan on December 15th by the ministry of finance and central bank also announced that to a floating exchange rate system replace fixed exchange rates.
Argentina's South American neighboursBrazilOver the past three months, successive by standard & poor's and fitch two credit ratings agencies listed in the "junk", the Brazilian real and dollar-denominated bonds fall, affected the opposition against the PresidentrousseffThe impeachment of also continues to ferment.
The history will repeat itself, the parties debated, but the overall judgment is still optimistic.
GermanyCommercial Banks in emerging markets strategist at Quijano - Evans says, the number of countries peg exchange rate this year and in 1997.And that emerging market systemic defects, namely in the government budget and balance of payments is highly dependent on oil.
But BorisSchlossberg BK asset management of foreign exchange strategy manager argues that don't need to cancel the currency controls in Argentina, a move that will eventually to Argentina's economy and the investor benefits, promote the recovery of Argentina.
Above the personage inside course of study says, in dollar rate rises, a currency crisis in emerging countries, and even spread into the possibility of economic crisis is very big, but it's too early to assert that Argentina's move will lead to the economic crisis.
Another is of the personage inside course of study thinks, although the move Argentina agent similar to Thailand in 1997, but the present situation and is not the same at the time, on the one hand, emerging economies, currency float level was higher than that of 1997, foreign exchange reserves are more abundant at the time, more defensive.This round of raising interest rates, on the other hand, is the most slow a history process, at least a year after the cycle to raise interest rates six times, and the lattice figure according to the federal reserve, will raise interest rates next year 3 to 4 times, the federal funds ratefuturesIndicates that there are widely expected to raise interest rates next year 2 times.Based on this, don't worry about history repeat itself.