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Page added on August 11, 2015
India, Russia And Thailand Prepare For Currency War
When China sneezes, the world catches a cold. Alternatively, when China devalues, the rest of the (exporting) world scrambles to not be the last (exporting) nation standing, and to do so next, before everyone else does.
Case in point, at least three major emerging market nations announced they are bracing for currency war.
First India, where NDTV ask rhetorically “How China’s Devaluation of Renminbi Impacts India” and answers:
1) The Indian rupee slipped to a two-month low of 64.26 against the US dollar on Tuesday tracking the devaluation of the renminbi. Other currencies such as the Australian dollar and the South Korean won also lost ground.
2) The over 0.5 per cent fall in the rupee weighed on traders’ sentiments, resulting in a drop in equity markets. Both the BSE Sensex and the Nifty traded with 0.4 per cent losses.
3) According to SV Prasad of Chime Consulting, renminbi’s devaluation may push the Reserve Bank of India to cut interest rates in India. Lower interest rates will put off foreign investors and will further weaken the rupee, he added.
4) However, fund manager Sandip Sabharwal said India should not be too worried about the devaluation in renminbi. “Analysts are out with predictions of how a 1.5 per cent fall of Chinese currency will lead to a sharp increase in dumping etc. However the Indian rupee has also fallen nearly 0.8 per cent in sympathy and is now down 5 per cent over the last one year. It is hard to see a major impact of this on Indian stock markets or the economy unless yuan depreciation becomes a trend which seems unlikely at this stage,” he said.
5) A fall in the value of the rupee is good for Indian exporters and sectors such as IT and pharma are seen gaining from the depreciation in the rupee. IT stocks were the top performers in stock markets today. However, China-focused Indian companies saw selling pressure because the devaluation of renminbi will make imports costlier in the country. As a result metal stocks saw selling pressure and underperformed broader markets.
Then there is Thailand, where the senior executive vice president of the Stock Exchange of Thailand, Pakorn Peetathawatchai, said that “China is a very important market and a weaker yuan makes our exports there more expensive.” He added that weaker yuan also increases travel costs for Chinese tourists.
Well, yes, it’s called “war” for a reason.
Finally, there is Russia whose economy is already in a tailspin now that the dead cat bounce in oil has ended, and where moments ago RIA said that the Yuan devaluation puts pressure on RUB, other EM currencies. Still, the Russian Economy Ministry sees no domestic factors for ruble devaluation, RIA adds even as it admits crude prices to stay under pressure in 2015.
We give Russia, Thailand and India (as well as the rest of the EM countries, actually make that all countries, the US included) at least a few days (hours may suffice) before they all realize that in a beggar-thy-neighbor global currency war, where the ZIRP (or NIRP) liquidity trap is already stalking at least half of the entire world, there really is no choice.
Expect a dramatic surge in interest rate cuts over the next several weeks as the rest of the world realizes this is not some bad dream and responds, and the tit-for-tat FX defection regime (also known elsewhere as “war”) goes thermonuclear.
21 Comments on "India, Russia And Thailand Prepare For Currency War"
Newfie on Tue, 11th Aug 2015 6:53 pm
Great Depression II looming ?
redpill on Tue, 11th Aug 2015 7:49 pm
Before you take Zerohedge, be aware of the following possible side-effects:
-IQ loss
-Increased propensity to make bad stock market trades
-Increased anxiety
-Unusual body odor
Davy on Tue, 11th Aug 2015 8:41 pm
Zerohedge is a blast Red. Are you afraid of running naked and free? Try it some time it is liberating.
Rodster on Tue, 11th Aug 2015 8:50 pm
Just another example of how the East is NO different than the West. When you boil it down they are all Banksters. BUT..but, China has plans to make the Yuan the next world’s reserve currency backed by gold.
Oh Ye Suckers !
idontknowmyself on Tue, 11th Aug 2015 8:50 pm
Global Markets Turmoil After China Extends Currency War To 2nd Day – Devalues Yuan To 4 Year Lows
http://www.zerohedge.com/news/2015-08-11/yuan-collapses-stocks-slide-credit-risk-hits-2-year-high-after-china-devalues-curren
I am trying to find another news source to confirm above.
Human emotions are now in charge mainly fear and panic.
Data, debt, price of oil, logical reasoning don’t matter anymore. The human specie is about to shift in survival mode where human survival biological behaviour will be the decision maker, not logic.
There is nothing wrong with ZeroHedge, it is the responsibility of the reader to analyze facts himself and either accept it or reject it base on his life experience.
There is no such thing as good or bad data, good or bad opinions, only stupid people that cannot think for themself and think they know everything because mommy told them they were perfect since birth.
apneaman on Tue, 11th Aug 2015 9:28 pm
China devalues yuan currency to three-year low
http://www.bbc.com/news/business-33858433
Oil hits new low, dragging Canadian dollar close to 76 cents
Commodities fall amid fears Chinese economy faces sustained slowdown
http://www.cbc.ca/news/business/oil-hits-new-low-dragging-canadian-dollar-close-to-76-cents-1.3187041
Oil down 4 per cent after China yuan devaluing, weak OPEC outlook
Read more at:
http://economictimes.indiatimes.com/articleshow/48443596.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
Plantagenet on Tue, 11th Aug 2015 10:11 pm
The global economy is starting to melt down again.
Wheeeee! This is fun!!
Makati1 on Tue, 11th Aug 2015 10:22 pm
Only the next step in the ongoing war.
The Philippine Peso has devalued ~4% over the last few days. My dollar buys more now. This means my rent, electric, water, food, etc. just went down by 4% as they are not payable in USDs.
Makati1 on Tue, 11th Aug 2015 10:39 pm
“According to a Federal Reserve report released on July 17, the rising value of the U.S. Dollar is having a significant negative impact on large U.S. based multinationals. The report noted that “The dollar’s strength likely explains roughly a third of the recent decline in profits earned from foreign subsidiaries” and that “Firms with high foreign sales tend to be larger and account for almost 75 percent of S&P 500 nonfinancial earnings excluding oil and utilities.””
“What China’s Devaluation Means to the U.S. Economy”
http://wallstreetonparade.com/2015/08/what-chinas-devaluation-means-to-the-u-s-economy/
Let the games begin!
Davy on Wed, 12th Aug 2015 5:16 am
OH, Makster the king of spin!! Makster loves to make good news good news and bad news good news just like the establishment he hates. Do you secretly hate yourself Makster because you act like the people you hate? Nope because you are a narcissist and they love themselves because they think their shit don’t stink. I thought you said your tiny Philippines island of 100Mil was so wonderful. You say how it is a Club Med and an economic rising star. Now the China project is falling on its face and with it the P’s.
Makster, I thought the US dollar was nothing more than Charmin shit paper. Now you are saying it is going up in value. What is the deal Makster. It sucks when you are so wrong and on a regular basis. What shit paper do you use Makster? You need it. I am going to start calling your stinky.
BobInget on Wed, 12th Aug 2015 9:14 am
Oil, traded in USD’s.
Has oil, important for human survival become a
surrogate for the USD?
Water, it’s argued, is our most important element. Currently, because nuclear, solar,
are still developing technologies, oil (and gas)
remain paramount energy resources available
to extract, reclaim water.
BobInget on Wed, 12th Aug 2015 9:39 am
CONSUMPTION Reaches 20,400,000 BB p/d
(for the last FOUR weeks consumption has
gone up by 100,000 barrels p/d each and every week). Obviously, because gasoline prices have stabilized.
Summary of Weekly Petroleum Data for the Week Ending August 7, 2015
U.S. crude oil refinery inputs averaged over 17.0 million barrels per day during the week
ending August 7, 2015, 46,000 barrels per day less than the previous week’s average.
Refineries operated at 96.1% of their operable capacity last week. Gasoline production
increased slightly last week, averaging 10.0 million barrels per day. Distillate fuel
production increased last week, averaging over 5.1 million barrels per day.
U.S. crude oil imports averaged about 7.6 million barrels per day last week, up by
393,000 barrels per day from the previous week. Over the last four weeks, crude oil
imports averaged about 7.6 million barrels per day, 1.1% below the same four-week
period last year. Total motor gasoline imports (including both finished gasoline and
gasoline blending components) last week averaged 683,000 barrels per day. Distillate
fuel imports averaged 118,000 barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum
Reserve) decreased by 1.7 million barrels from the previous week. At 453.6 million
barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at
least the last 80 years. Total motor gasoline inventories decreased by 1.3 million barrels
last week, but are in the middle of the average range. Both finished gasoline inventories
and blending components inventories decreased last week. Distillate fuel inventories
increased by 3.0 million barrels last week and are in the middle of the average range for
this time of year. Propane/propylene inventories rose 2.4 million barrels last week and are
well above the upper limit of the average range.
Total commercial petroleum inventories
increased by 5.6 million barrels last week.
Total products supplied over the last four-week period averaged 20.4 million barrels per
day, up by 3.2% from the same period last year. Over the last four weeks, motor gasoline
product supplied averaged over 9.6 million barrels per day, up by 6.6% from the same
period last year. Distillate fuel product supplied averaged over 3.7 million barrels per day
over the last four weeks, down by 5.4% from the same period last year. Jet fuel product
supplied is up 0.2% compared to the same four-week period last year.
BobInget on Wed, 12th Aug 2015 9:54 am
The big downer here is Jet Fuel.
I can’t figure this one out. Air miles were up through April but slowed during summer.
I guess Americans are following the Chinese,
Russian models of automobile love.
Because ‘dash cams’ are ubiquitous on Russian cars, I follow “We Love Russia”
on YouTube. One can’t help but wonder if
Chinese also drink and drive like Russians.
BobInget on Wed, 12th Aug 2015 10:13 am
How cheap will Chinese cars get?
http://www.alibaba.com/countrysearch/CN/cheap-cars.html
How about a four seater for a grand per seat?
A diesel pick-up? Half price. If you can find a US equal, which a person can’t.
http://www.alibaba.com/trade/search?fsb=y&IndexArea=product_en&CatId=&SearchText=diesel+pick-up+trucks
Low cost Chinese goods will be flooding US and European markets for your holiday shopping pleasure.
Davy on Wed, 12th Aug 2015 11:03 am
Have fun getting those half price pickups worked on. What about quality? Sorry Bob, I will pass.
BC on Wed, 12th Aug 2015 12:40 pm
WRT to the “strong US$”, note that in terms of reported CPI and the CPI- and US$-adjusted price of gold, the US$ fell ~80% from 2000-02 to 2014. The “adjustment” since last year back to near par is hardly a reflection of US$ “strength” but rather where it should be now that the secular trend rate for real GDP per capita and global “trade” is decelerating to 0% with regional GDP PPP at, or near, parity.
IOW, with the “Limits to Growth” (LTG) and the US and Japan pulling FDI from China-Asia, the major fiat digital debt-money currencies should be expected to trend toward par with one another over the long run, whereas the US$-denominated price of commodities will settle around the levels of the late 1990s to early to mid-2000s (when global growth peaked and unsustainable debt surged that will have to be deflated eventually), reflecting weak growth of demand associated with LTG and GDP PPP.
FWIW.
BC on Wed, 12th Aug 2015 12:49 pm
Bob, WRT to air miles PER CAPITA, we’re at the levels of the late 1990s to early 2000s, which is the same as real retail sales ex autos per capita and private full-time employment per capita.
Apart from strong auto sales driven (sorry) by subprime auto loans, and air and hotel spending for businesses (so far), household disposable income for the bottom 90% is spent by the time the paychecks arrive, leaving nothing for discretionary spending.
Moreover, the top 1-10% are spending their discretionary income on low- or no-multiplier services, such as foreign travel and luxury imports, as well as trophy art and unreal estate, vintage autos, overvalued assets, etc.
All of this is occurring with total gov’t spending as a share of private wages at ~90%, and wages as a share of GDP at a post-WW II record low.
Gov’t, health care, private education, and debt service combine for an equivalent of 54% of GDP.
Total annual net flows to the financial sector equal total annual GDP output as of 2008. The US economy cannot grow after the financial sector (and its top 0.001-1% owners) take their cut from labor, profits, and gov’t receipts.
Therefore, the US economy is perpetually vulnerable to “stall speed” from any number of “exogenous” shocks.
BC on Wed, 12th Aug 2015 12:51 pm
Bob, how much is the reported marginal consumption being consumed by the energy and energy-related transport sectors because of the mad rush to pump for the cash flow to keep the operations going, profits or no?
marmico on Wed, 12th Aug 2015 1:06 pm
The real trade weighted USD index is weak, close to its lowest levels in the data set, BC. Please enlighten us with your take on the 1985 Plaza Accord which is quite visible on the 40+ years on the chart. Musta been some bilderbergerwhodonitthingie. 🙂
Go back and do some more charts for Deflation Shedlock! Mish is a real asset management whiz. Not.
apneaman on Wed, 12th Aug 2015 3:51 pm
Oh how I so much enjoy the shrill cries of marm-A-noon striking and lashing out at everyone like a cornered cobra. You can smell his fear and rage as the pace of the unraveling quickens. Unbelievers must be shouted down in a pathetic bid to ward off the end of another failed ape made religion. Something will replace it and it too will have it’s zealous defenders and clever apologists. Maybe you can be an early convert noon and that way you will always have something to cling to to soothe those late night anxieties. It won’t be long now till the nony’s start openingly calling for blood for real and most of the sheep will be right behind – anything to make believe someone else is to blame and the delusion that more war, at home and abroad, will somehow maintain whats left of that thin techno-carbon veneer between us and nasty brutish and short.
Makati1 on Wed, 12th Aug 2015 9:38 pm
Apneaman, many are afraid to walk by the Graveyard of Hopes so they avoid it if possible, or they whistle and pretend it isn’t there. But, at night it haunts their every dream.
I prefer to face reality head on and prepare as much as my limited resources will allow. That doesn’t mean I stop living. I still go to movies, eat good food and fly to the US annually. I just don’t waste my resources pretending the future is BAU.