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Cool Video: Bloomberg Clip from Discussion on Emerging Markets

Summary:
Bloomberg Clip from Discussion on Emerging Markets In my first television appearance since joining Bannockburn Global Forex, I joined Tom Keene and Francine Lacqua on the Bloomberg set. In this nearly 2.5 min clip, we talk about the Indonesia rupiah and the dollar’s move above the IDR15000 level for the first time since the 1997-1998 Asian financial crisis. I suggest there are several factors weighing on many emerging market currencies, including the rupiah. These include Fed policy, whose tightening course which was reaffirmed a week ago, the underlying strength of the US dollar, not totally unrelated to Fed policy, and the sharp rally in oil prices. Indonesia has been hit be a devasting earthquake and tsunami,

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Cool Video: Bloomberg Clip from Discussion on Emerging Markets

Bloomberg Clip from Discussion on Emerging Markets

In my first television appearance since joining Bannockburn Global Forex, I joined Tom Keene and Francine Lacqua on the Bloomberg set. In this nearly 2.5 min clip, we talk about the Indonesia rupiah and the dollar’s move above the IDR15000 level for the first time since the 1997-1998 Asian financial crisis.

I suggest there are several factors weighing on many emerging market currencies, including the rupiah. These include Fed policy, whose tightening course which was reaffirmed a week ago, the underlying strength of the US dollar, not totally unrelated to Fed policy, and the sharp rally in oil prices. Indonesia has been hit be a devasting earthquake and tsunami, which, in addition to the human tragedy, presents additional economic challenges. Since May, the central bank has hiked rates five times, including a 25 bp hike last week, but has proven insufficient to stem the tide, and the market has begun pricing in the next hike too. Although Indonesia is an oil producer, it does not produce enough for domestic demand and must also import oil now. Indonesia’s current account deficit is expected to rise this year, back above 2% for the first time since 2015.

Indonesia is trying to devise other means of supporting the currency. For example, it has introduced a non-deliverable domestic forward that ostensibly could be used as a hedging tool for businesses without exerting more pressure on the rupiah. There are also some measures under consideration that may encourage exporters to convert their dollar holdings into rupiah.

The April 2019 election seems too far off to be a key factor for investors. In the aftermath of the natural disaster, the campaigns were suspended. Still, the latest polls show President Widodo with a comfortable lead. For the first time, both the president and parliament will be elected on the same day.


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Marc Chandler
Marc Chandler is Global Head of Currency Strategy of Brown Brothers Harriman (BBH). Previously he was the Chief Currency Strategist for HSBC Bank USA and Mellon Bank. He has been covering the global capital markets in one fashion or another for 25 years, working at economic consulting firms and global investment banks. A prolific writer and speaker he appears regularly on CNBC and has spoken for the Foreign Policy Association. In addition to being quoted in the financial press daily, Chandler has been published in the Financial Times, Foreign Affairs, and the Washington Post. BBH provides specialist services and innovative solutions to many Swiss asset managers that include a global custody network of close to 100 markets, accounting, administration, securities lending, foreign exchange, cash management and brokerage services. Feel free to contact the Zurich office of BBH

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