These are some scary graphs

by Gilbert Keith

USD vs. Various EM currencies (INR ==> Indian Rupee, IDR ==> Indonesian Rupaiah, BRL ==> Brazilian Real, RUB ==> Russian Ruble, ZAR ==> South African Rand)

You can click any of the pictures to get to the chart. Since it is a comparison across currencies, you’ll only see % changes; absolute numbers won’t make any sense here. I chose these specific currencies because they are from the BRIC countries.

Why? This-

Emerging-Market Currencies Fall to Lowest Since 2010 on Fed

By John Detrixhe – Aug 24, 2013

India’s rupee led declines among the currencies of the biggest emerging-market economies as the Federal Reserve signaled a reduction in stimulus is still on track, spurring a wave of cash to flow back into larger nations.

The Bloomberg U.S. Dollar Index rose for a second week and touched its highest level since Aug. 2. An equally weighted basket of currencies of Brazil, Russia, India, China and South Africa touched its lowest level versus the dollar since June 2010 on concern a paring of stimulus under the Fed’s quantitative-easing strategy would intensify outflows from the currencies. The Commerce Department may report Aug. 30 that U.S. consumer spending increased 0.3 percent in July.

And this-

India in trouble

The reckoning

Why India is particularly vulnerable to the turbulence rattling emerging markets

ON THE morning of August 17th most of India’s economic policymakers gathered in the prime minister’s house in Delhi. […]

The day before Indian financial markets had had their rockiest session for many years. The rupee sank and stockmarkets tumbled. Money-market rates rose. […] The sell-off had been made worse by new capital controls introduced on August 14th […] Foreign investors took fright, fearful that India might freeze their funds too, much as Malaysia did during its crisis in 1998.

India’s authorities have since ruled that out. But markets keep sliding. On August 20th the RBI said it would intervene to try to calm bond yields. The rupee has dropped to over 64 to the dollar, an all-time low and 13% below its level three months ago. It is widely agreed the country is in its worst economic bind since 1991.

India is not being singled out. Since May, when the Federal Reserve first said it might slow the pace of its asset purchases […] There has been a great withdrawal of funds from emerging markets, where most currencies have fallen by 5-15% against the dollar in the past three months. Bond yields have risen from Brazil to Thailand.

If you need more background, search for “Emerging Market Currencies” on Google News.

The graphs all show the USD increasing in strength. i.e. you’ll see positive numbers in most places. This makes sense because in a USD trade, a declining ‘other currency’ means a strengthening Rupee.

Over the last month

~8% MoM change! Nearly 15% over 2 weeks for a while for the INR, but back down to 7.5%.

Image

Over the last 3 months:

Image

Over the last 6 months:

Image

For giggles, here’s a 10yr chart:

Image

It’s kind of strange. I know these are relative to some arbitrary date in 2003.. but you’ll notice that there has been a steady run-up since the middle of 2011.

Indeed, this is what it looks like since June 03, 2011. Nearly every country (save for Indonesia, somehow) has seen relatively quick surges on the order of ~10% every so often. Of course, I only speak with retrospective charts as my source of data, but it seems like this recent experience is nothing new, and was probably something that you could foresee far back.

I vaguely remember the excitement in the runup to QE2. I didn’t understand much back then, but it seemed pretty apparent that BRICS were being invited to a party which we knew would end at some point. The key was to figure out when the guests would start to leave. It seems they’re leaving in full force.

Screen Shot 2013-09-10 at 11.16.56 AM

EDIT: left the last thought incomplete.

Advertisements