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Currency Co-ordination by EM nations unlikely

Posted by WorldWideMarkets . on Sep 3, 2013 3:21:00 AM

There has been talk of co-ordinated currency intervention by emerging market nations to stem
the rise of the dollar or conversely cut the bloodletting in their own currencies. The talk was for 12 of the main emerging market currencies, including Brazil, China, India, Russia, South Africa, Turkey, and Malaysia to act in unison with figures bandied about of up to $6 trillion in reserves to play with. But while it may have made a good news story don’t expect too much.

That $6 trillion being bandied around is mostly China, which is acting well enough on its own with yuan management. Why would they care what happens anywhere else? Four other members combined are said to have some $1 trillion to play with yet that is a lot of money to place in play on trust of what other nations will do. The story prompted some denials and no comments but irrespective of that, we just don’t see it happening. Why would a sovereign nation already struggling, risk its reserves to help another nation, even if it is self help, when in all likelihood any such actions are doomed from the start. EM currencies will continue to take a hit unless they convince the Fed to do something about the dollar as well and that has zero probability.

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