The worlds emerging market currencies have posted gains against the Pound and other peers after US President Barrack Obama nominated current Federal Reserve Vice Chairwoman Janet Yellen as the successor to Ben Bernanke who is due to step down as Fed Chairman on January 31st 2014.
Currencies such as the Indian Rupee and South African Rand were able to post gains against the US Dollar and other major currencies as economists speculate that Yellen if successful in taking the top job will be in favour of maintaining the Central Bank’s $85 billion monthly stimulus programme. The news increased investor appetite for emerging- market bonds and stocks.
“As vice-chairman of the Fed, Yellen has been a big supporter of quantitative easing and is seen as a dove. Risk assets will welcome her nomination as it signals a high likelihood of continued easy US monetary policy” said currency strategist John Cairns.
Whilst emerging market economies are happy with Yellen’s nomination, Japan is not. Koichi Hamada, an advisor to Japanese Prime Minister Shinzo Abe warned that Yellen’s nomination raises the odds of prolonged monetary easing which could strengthen the Yen at the detriment of the Japanese economy.
“Yellen probably won’t seek an exit from an accommodative policy immediately. If the Fed lengthens stimulus, the Yen may gain, hurting Japan’s recovery” Hamada said in a telephone interview with Bloomberg.
The nomination news bolstered the lacklustre US Dollar which has received a bit of a kicking over the past two weeks as the Federal government shutdown drags on. The markets remain nervous ahead of the quickly approaching October 17th deadline for raising the debt ceiling.
Comments are closed.