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Even as the rupee embarked on the path to recovery from the latter half of 2013, many emerging market (EM) currencies continued to weaken. But some seem to have begun 2014 on a new note.
Gaining 10.9 per cent, the Brazilian real has emerged the lead gainer. Speculation that a change in the government post-elections will support economic growth has boosted sentiment. The newly released fiscal targets for 2014, too, have raised hope.
The Indonesian rupiah has surged 8.2 per cent on the back of improving macroeconomic conditions – moderating inflation and a positive trade balance.
With the optimism of a Modi win attracting foreign investors in large numbers, the Indian rupee has continued to gain, rising 9.5 per cent this year. Other EM currencies, however, have not been that lucky.
Weakening faith in the Argentinean peso and rising energy imports have been fuelling dollar demand in Argentina. While the central bank had been intervening in the currency market to stem the peso’s decline, dwindling forex reserves forced it to withdraw support in January. This has seen the peso slide 4.5 per cent. Meanwhile, the Chinese renminbi has shed 2.2 per cent.
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