Indian stocks lead Asian markets higher, rupee up

SYDNEY - Asian stocks rose to three-week highs on Thursday as Indian shares and the rupee rallied a day after the country's new central bank chief unveiled measures to support the currency and the banking sector.

But worries the U.S. Federal Reserve will soon scale back stimulus kept markets in check. MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.6 percent, having earlier hit a high last seen on August 19.

Financial spreadbetters expect modest opening gains for key European markets, mirroring Asia's performance. 


India's benchmark BSE index put on 2.1 percent, South Korea's KOSPI rose 1.0 percent, while Thai stocks climbed 1.6 percent.

Tokyo's Nikkei closed a touch firmer, having lost a bit of steam after hitting a one-month high. Still, it is up an enviable 5 percent so far this week.

The moves followed a second day of gains on Wall Street spurred by another set of upbeat U.S. data, though the figures have also added to the chance of the Fed tapering its stimulus program.

"Strong car sales in the U.S. again lifted market confidence in the economy, and lifted expectations that the U.S. Federal Reserve will start cutting back its stimulus this month," said Isao Kubo, an equity strategist at Nissay Asset Management. "There is a sense of caution in the market."

Markets appeared to have cast aside worries about Syria for the moment, even as a possible U.S. military strike moved one step closer after a Senate committee voted in favor of action, clearing the way for a vote in the full Senate, likely next week.

Central bank focus

Former IMF chief economist Raghuram Rajan took the helm at the Reserve Bank of India in grand style on Wednesday, announcing an array of measures to liberalize financial markets and the banking sector.

The rupee rose to as high as 65.53 per U.S. dollar, pulling well away from a record low around 68.85 set last week.

Radhika Rao, an economist at DBS in Singapore, said the path of action plotted by the new governor was a welcome move.

"Still, the external drivers of the rupee weakness will continue to dictate the momentum, along with the urgent need to address domestic structural pitfalls - fiscal and current account deficits, along with reviving investment activity," she said in an email to clients.

As expected, the Bank of Japan maintained the massive monetary stimulus launched in April and revised up its outlook for the economy following a two-day review. Governor Haruhiko Kuroda will give a media briefing later in the day.

The European Central Bank takes centre stage next, although it is widely seen keeping rates low for an "extended period".

U.S. data on Wednesday showed auto sales raced past expectations in August, ahead of the closely-watched payrolls data on Friday, extending a string of upbeat U.S. data that has reinforced expectations the Fed will soon start to pull back support.

Such expectations have underpinned the U.S. dollar, which remained near a six-week high against a basket of major currencies.

The euro briefly popped above $1.3200, before slipping back 0.3 percent to $1.3173. It remained within spitting distance of a six-week low of $1.3138 plumbed earlier this week.

Against the yen, the dollar reached a one-month high of 99.99, while the euro retreated slightly from a two-week peak around 131.81 yen reached overnight.

Among commodities, Brent crude oil added 12 cents to $115.05 a barrel, while copper futures were flat at $7,126.00 a metric ton.

India, along with many emerging markets, has also been hit hard by an outflow of funds as international investors positioned for a world with less central bank support.

The IMF, in a note prepared for the Group of 20 meeting in St. Petersburg, warned that emerging countries were particularly vulnerable to a tightening of U.S. monetary policy.

It urged strengthened global action to revitalize growth and better manage risks, adding some downside risks have become more prominent.

source: interaksyon.com

Rupee, rupiah lead emerging market slide on US Fed fears

MUMBAI/JAKARTA - India's rupee crashed to a record low and the Indonesian rupiah hit a 4-year trough on Monday, as the expected withdrawal of U.S. monetary stimulus prompts investors to shun emerging markets burdened by weak external balances, slowing economies and inflation.

It followed a slide on Friday in Brazil's real, a currency that, like the rupee, has been hammered by investor doubts that actions taken by monetary authorities last week will prove effective in stemming the sell-off.

"Our primary concern is that the policy authorities still don't 'get it' - thinking this is a fairly minor squall which will simmer down relatively quickly with fairly minor actions," Robert Prior-Wandesforde, an economist at Credit Suisse in Singapore, wrote in a note on the Indian currency on Monday.

Growing expectations that the U.S. Federal Reserve will start scaling back its bond purchases as early as next month, slowing the flow of cheap money into higher yielding overseas assets, have weighed on many emerging markets.

The currencies of countries already struggling with wide current account deficits, such as India and Indonesia, are seen as among the most vulnerable to sudden capital flight and have been hit hardest.

"The market is still acting on the negative current account and fiscal deficits," said Nizam Idris, a strategist with Macquarie Capital, when asked about the two Asian laggards.

The latest blow for Indonesia's currency was delivered by central bank data released late on Friday that showed the current account deficit grew to 4.4 percent of GDP in the second quarter of the year, from 2.4 percent in the previous quarter.

"Although the current level of reserves is still equivalent to a reasonably healthy 5.5 months of imports, the Bank can't continue to burn reserves at the current rate without the market worrying about a 'crisis' scenario unfolding," Credit Suisse said in a note.

Indonesia's Finance Minister Chatib Basri said he was not worried by the rupiah weakness and predicted the current account deficit, though it would remain into next year, would narrow.

'Tapering' threat

Some analysts predicted the weakness could ripple out to other Asian markets, with Malaysia's current account data due on Wednesday likely to be closely watched.

India's tumbling currency has been the worst performer in Asia since late May, when the Fed first signaled that it may begin "tapering" its monetary stimulus this year.

Indian policymakers are grappling with a record current account deficit at 4.8 percent of GDP - and market participants aren't convinced the government can reduce the gap to a targeted 3.7 percent this financial year.

The Reserve Bank of India (RBI) has been selling dollars to support the rupee and last week announced curbs on outflows from companies and individuals, denting stock and bond markets.

"Forex intervention will continue by the central bank," said Param Sarma, chief executive at Brokerage NSP Forex. "Further measures are expected from the RBI but are unlikely to be effective."

Brazil's central bank has also intervened to try and reassure investors, but could not prevent the real from sinking on Friday to its lowest level since the depths of the global financial crisis in 2009.

The real's poor record during previous bouts of market volatility and its steep gains over the past decade are some of the reasons why it is now seen as a risky trade - a "high beta" currency in the jargon of the foreign exchange markets.

Domestic concerns have also made things worse.

As with India, a previously fast-growing economy has slowed, disappointing investors. Also, like Indonesia, a cooling in China's appetite for its commodities exports has resulted in a sharp deterioration in its balance of trade.

source: interaksyon.com