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Emerging Market Currencies Have Been Battered To Test China's Ability To Make Decisions

2014/2/11 12:40:00 29

Emerging Markets Currencies And Heavy Losses

On the 23 day of last month, P, lira, Argentina pesos, South African rand, Brazil Real and other "a href=" //www.sjfzxm.com/news/index_s.asp "emerging markets < /a > national currencies fell sharply in the foreign exchange market in. The Russian rouble exchange rate against the US dollar also weakened all the way to a 5 year low, and Argentina Peso declined more than 15% against the US dollar. 
Less than P, the most tragic thing is that Argentina has no choice but to stop supporting the currency Peso exchange rate in order to maintain nearly 1/3 of its foreign exchange reserves in the past year. The move resulted in the biggest decline in the peso in 12 years. Like the butterfly effect, emerging markets are generally immersed in sadness. And the government of Argentina made a decision to become the butterfly that flapped its wings. 
 the Argentina government said last month that it would begin to allow us to use savings to buy US dollars and relax stringent foreign exchange control 24. However, this statement, the previous two trading days due to the loss of confidence and the loss of 14% Peso exchange rate, the day fell again about 1.5%. Although some developing central banks have intervened in the foreign exchange market, they failed to stop the downtrend. Turkey's lira, Argentina pesos, South African rand, Brazil Real and Russia's rouble fell more than 1% against the US dollar. 
 the two regional financial crises that have been detonated by the exchange rate crash in history have shown signs of repetition: /p >
 together is the financial crisis of Mexico in 1994. Late in December 19, 1994, the Mexico government suddenly announced that its Peso was depreciated by 15%. This decision has caused great panic in the market. Foreign investors frantically sell the peso, snapping up the dollar, and the peso exchange rate has plummeted. 
Less than three days from 20 to 22, the exchange rate of Mexico's peso dollar changed by 42.17%, which is extremely rare in the history of modern finance. There are two main reasons for this incident: from domestic factors, about 70% of foreign investment absorbed by Mexico is speculative short-term securities investment. The capital outflow has been a drop in the stock market for Mexico, and the Mexico stock market has fallen. Compared with the 2881.17 highest point before the financial crisis in 1994, it has fallen by 47.94%, and the stock market has fallen more than the depreciation of peso. 
 from the international perspective, the Fed raised interest rates in order to curb inflation and led to massive return of capital from Mexico to the United States. Mexico was plunged into a serious financial crisis due to currency devaluation. 
After the outbreak of the crisis, private investment in Mexico decreased by 29.5% and public investment decreased by 8.7%. In 1995, the gross domestic product will decline by 2%, the cumulative inflation rate will reach 50%, and the unemployment rate will also reach a record high of P. 
 another Asian financial storm in 1997. In July 2, 1997, the Asian financial turmoil swept across Thailand and the Thai baht depreciated. Soon the storm swept through Malaysia, Singapore, Japan and South Korea. It has broken the rapid development of Asian economy. The economies of some Asian economies are beginning to slump, and the political situation in some countries is starting to become chaotic. 
There are three main reasons for the incident. from the perspective of regional factors, the export-oriented economic form of Asian countries leads to too much external capital. At the same time, in order to attract foreign investment, Asian countries maintain a fixed exchange rate on one hand, expand financial liberalization on the one hand, and implement free flow of capital completely, which provides an opportunity for international speculators. 
According to international factors, the United States uses the US dollar hegemony to take care of its own economy and ignore the impact of turbulence in the US financial market on P. At the same time, there are also some elements of George Soros's personal and some capitalist groups supporting him to use the quantum fund to stir up trouble and seek their interests. 
 in the two regional international financial crises, the mainland of China was spared. The reason is obvious. From the perspective of domestic factors, at that time, the degree of opening up to the outside world of China's economy was not high, and the degree of integration into the world economic cycle was still shallow, and the export oriented economy had not yet been formed. More importantly, the exchange rate and current account and capital account control are strict and basically can not be freely convertible and mobile. At the same time, the scale and proportion of international capital flowing into the mainland of China are not large. 
(P) this emerging market currency has gone through a crazily sell-off, leading to an avalanche fall. Once the regional financial crisis is detonated, it is very difficult for the mainland of China to escape. China can not compare with the financial turmoil of Mexico and Asia in the 90s of last century. 
Since the beginning of this century, China has embarked on the path of export-oriented economic development, with a large surplus in trade surplus, rapid growth in foreign reserves, huge scale, large inflow of international capital, and deep integration into the world economic cycle. P Once the global financial turmoil is going on, the mainland of China will bear the brunt. The aftermath of the 2008 financial crisis is not proof. If this emerging market has regional financial crisis, the impact and impact on China will be greater than the 2008 financial crisis. 
 the proportion of international capital in the mainland of China is very large. Withdrawing from the US will surely bring greater impact to China. Meanwhile, asset bubbles such as real estate in mainland China are quite serious and quite dangerous. Withdrawal of foreign capital will surely puncture bubbles and cause financial turbulence. At the same time, since the end of the Fed announced the beginning of this year, the size of the stock market has been reduced since the beginning of this year. The stock market in developing countries has been under pressure. The stock market index of emerging market countries has fallen by more than 9% since mid October. China's stock market is also continuing to slump. 
The US Federal Reserve will hold its first monetary policy meeting this week. The market is widely expected that the Federal Reserve will raise its quota for the withdrawal of the debt purchase plan at the last regular meeting of the chairman of the Federal Reserve Bernanke, P. Some market analysts worry that if the Federal Reserve cuts the size of the debt purchase again, it will probably lead to another massive outflow of emerging capital. Local financial turmoil in emerging markets could lead to hurricanes. And the hurricane formed by the butterfly effect will undoubtedly sweep across the emerging markets of China. 
 of course, we should also see that the mainland has two favorable factors to deal with the avalanche of emerging market currencies and even lead to financial turmoil. 
 one is the managed floating flexible exchange rate system implemented in China, which avoids the disadvantages of the fixed a href= "//www.sjfzxm.com" and the exchange rate < /a > system. If China continues to carry out the fixed exchange rate system and liberate capital flows freely and in and out, it will inevitably be affected. This shows the importance of accelerating financial reform. 
 two is China's strong foreign exchange reserve strength which is lower than the financial turbulence of emerging markets. By the end of last year, China's foreign exchange reserves amounted to US $3 trillion and 820 billion. 
 the financial turbulence in emerging markets has brought new thoughts to the emerging market countries including China's foreign exchange liberalization and management. A country must choose two out of three goals. A country can fix its exchange rate or weaken its central bank, but the means must be to control capital flows; a country can also allow capital to flow freely and maintain the autonomy of the local currency, but the means must be to allow the exchange rate to fluctuate freely; 
A country can also choose to free capital flows and stabilize the exchange rate of its own currency, but the means must be to abandon the right to regulate the interest rate of the local currency in order to prevent inflation and economic recession. P At the same time, although the open economy has brought many benefits, excessive opening up, especially for short-term capital flows, is likely to be attacked by speculators. Investors can be recovered and withdrawn whenever they are put in. This could lead to financial crisis and banking crisis. 
 to China's a href= "//www.sjfzxm.com/news/index_c.asp" and "central bank /a" weigh the pros and cons and test their decision-making ability.