Currency Crisis : India, Indonesia and …

“JAKARTA, Indonesia—Investors are souring on Indonesia as growth slows and a contentious election approaches.

Some investors see more trouble ahead. Indonesia is one of several emerging markets dealing with slowing growth, high inflation and a widening current-account deficit, a toxic combination for policy makers. If the rupiah continues to slide, it will make imported goods more expensive, driving up inflation and worsening the country’s finances. Higher interest rates and lending restrictions would shore up the currency, but further depress growth.” Source : WSJ

Citi EM Portfolio Report :

“–    In Asia FX, we are underweight in IDR, MYR and THB. In CEEMEA we are   underweight TRY, ZAR and RUB. In Latam we are underweight COP and BRL, but overweight MXN and PEN.

–    In duration, we are underweight Indonesia, and South Africa. Latam is underweight Chile and overweight Colombia. ”

Bye Bye Indonesia !

Hello India !!

As I type, USDINR makes a new record lifetime high of 61.33 today breaking the old record set … yesterday.

“(Reuters) – The rupee fell to a record low on Tuesday, raising prospects for fresh measures to bolster a currency which has tumbled more than 12 percent since the start of May, but later pared its losses after the appointment of a new reform-oriented Reserve Bank of India (RBI) governor.”

Citi published the UGLY CHART yesterday. Foreign institutional holdings of INR debt.

ugly india chart

25% pulled out over 2 months. Its an exodus !

And this is not the end.

Morgan Stanley dubs the currencies of countries in this situation the “fragile five,” a club that also includes Brazil, Turkey, South Africa and India.”

Malaysia’s outlook just got downgraded last week and cracks are starting to show up in all the former darlings of the EM world. Thailand, Brazil, Turkey, Bulgaria with their riots. It is all looking hazy from here.

The gnawing worry now is if the respective central banks will throw in the towel and go for some form of capital controls.

The foreign reserves as of June are all  looking worn with Indonesia down 6.7%.


The trend appears to be intact into this month. Be warned.