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Emerging Market Currencies Recover on Fed Hold

Posted by Joseph Trevisani on Sep 19, 2013 3:04:00 PM

Yesterday's surprise Fed decision to continue quantitative easing purchases at $85 billion a month was popular far afield from Wall Street. For emerging markets currencies it promises continued relief from a four month battering that started in early May and accelerated as the Fed began to hint that its quantitative easing program could be phased out.

From the beginning of May until its low point on August 28, the Indian Rupee lost 28% of its value against the U.S. Dollar. The Brazilian Real shed 23% of its dollar worth in the same period.

The anticipation of higher interest rates in the United States brought investment redemption and currency sales as overseas investors liquidated bond and securities holdings in both countries.

Measures instituted by the Brazilian and Indian governments to counteract the weakness in their currencies had had substantial effect before the Fed announcement.  The Rupee had regained 7.9% by the close on Tuesday and the Real 8.0%. That recovery increased yesterday and today with the Rupee closing at 61.7750, an additional 2.5% gain and the Realadding  another 2.4% to 2.2017.

 

WorldWideMarkets

Charts: Bloomberg

real

rupee
 

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