India appoints Modi ally as new central bank head

NEW DELHI, India — The Indian government Tuesday named an ally of Prime Minister Narendra Modi as new central bank head after his predecessor quit following a row about alleged government interference.

Shaktikanta Das, named in a government statement as new Reserve Bank of India governor, is a former senior finance ministry official and a key figure in Modi's controversial "demonetisation" scheme of 2016.

His predecessor Urjit Patel announced his surprise resignation late Monday following months of tensions with Modi's government over interference in policy.

The government was thought to be pressuring the RBI to enact policies to help spur growth ahead of next year's elections, when Modi will run for a second term.

It was also believed to be unhappy with the RBI over issues including its handling of interest rates, how to deploy reserves and what to do about the sliding rupee.

Modi stunned Asia's third-largest economy in November 2016 by withdrawing 86 percent of banknotes from circulation.

The move was aimed at cleaning up India's graft-ridden economy where large volumes of transactions are conducted in cash and therefore undetected by the tax authorities.

Critics said it caused unnecessary suffering to millions of India's poor who operate outside of the formal economy.

Indian growth slumped as low as 5.7 percent in mid-2017 as it reeled from the move and other economic reforms, including the introduction of a nationwide goods and services tax.

"Modi government has hired an insider who will be sympathetic to government concerns and not hold diverging opinions as the head of RBI. Unlike Patel or (predecessor Raghuram Govind) Rajan, Das will offer no independent views and was also a key member when the demonetisation decision was taken," said Ashutosh Datar, an independent economist.

"This is extremely disappointing a choice and is the final straw in chipping away RBI's integrity and freedom to set rates or take policy decisions," he said.

source: philstar.com

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