Saturday, November 22, 2008

Capital Losing Color

Taking stock of currencies:
1. The Chinese currency has remained virtually unchanged because it is contained within a narrow trading band. China's currency has a 'crawling peg' to the U.S. dollar but is still not fully convertible.
2. The Singapore Dollar - among Asia's worst performing currencies this quarter after the central bank - the Monetary Authority of Singapore (MAS) shifted a 'zero-percent appreciation' stance last month. It has fell 6.2% against the dollar since October.
3. The Indian Rupee: This currency has shed 21% this year trading over Rs 50 to a dollar. The RBI has been selling dollars in the currency market either directly or through government-onwned banks to prop up the falling rupee
4. Of all the currencies in the world, the worst performing is the Icelandic Krona because the country essentially went bankrupt. The currency is down 55.70% year to date.
5. The Russian Ruble has already fallen significantly this year but the Argentinian Peso has only dropped 5%. But weakness is expected in both. Russia used up a quarter of its forex reserves (fell by $144.6 billion) since August as the central bank struggled to contain its worst financial crisis since 1998. The ruble slumped 15% against the dollar since July 31 and 5.5% versus a basket (which comprises of 55% dollars and the rest Euros)
6. South Korean Won has lost 40% and touched a 11 year low last week. One investment bank sent out the following note to investors : "We painfully realised that our 1.1 percent growth forecast for Korea in 2009, while being consistently the lowest on the street, is just too optimistic if our deleveraging theme plays out. Thus we are lowering the 2009 GDP forecast to minus-3 percent."
7. The Citigroup news is putting the dollar in a spot today, it is helping both the Yen and the Euro. But overall there is still confidence in the greenback despite fundamentals.
8. Relative to the dollar, the euro is weakening. Investors have lesser confidence in the Euro than in the dollar. (Notwitsdtanding the current scenario)
9. The yen rose against the dollar. It also gained against the Australian and New Zealand dollars on the speculation the carry trades will be reversed as the credit squeeze hurts profits of companies.

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