The Yen has gained 7% against the dollar so far this week as the “borrow cheap, lend dear” game ended for arbs and the great deleveraging continues to drive depositor towards perceived safety. Japanese conglomerates will be scrambling in the coming months to adjust to a new “strong Yen” environment as they watch the currencies of their export markets and manufacturing bases swing wildly –some will be caught flat footed and lead to serious margin compression.
On the other side of the ledger, the collapse of the Rupee is further indication that the wheels are coming off the track for the “I’ in BRIC. With a greater than 20% slide against the dollar YTD and foreign currency reserves that have declined by 15% since May the risk for the government in India is a flight of any capital. This rapid decline stands to offset any positive impact that the oil correction could have on inflation in this import dependent nation. There will be no easy policy fix for PM Singh’s coalition as they face the abyss.
Andrew Barber
Director
On the other side of the ledger, the collapse of the Rupee is further indication that the wheels are coming off the track for the “I’ in BRIC. With a greater than 20% slide against the dollar YTD and foreign currency reserves that have declined by 15% since May the risk for the government in India is a flight of any capital. This rapid decline stands to offset any positive impact that the oil correction could have on inflation in this import dependent nation. There will be no easy policy fix for PM Singh’s coalition as they face the abyss.
Andrew Barber
Director
