While the political leaders are sure that the economy is ready for drawdown of QE3, economists say that it will have negative impact on the currencies of the developing countries. As soon as the final decision on the quantitative easing program is made, investors all over the world will impose stricter requirements on these countries. Some specialists think that from now on when assessing the risk, investors will pay attention not only to the economic factors but also to the political situation. “It was the wrong signal to send at the wrong time. The FED says that tapering is not toughening but this is the first inflection point in Fed monetary policy ... A three-year rally [in emerging markets] cannot be corrected in a matter of months”, the strategist at B.B. Harriman Win Thin comments. Amid such news it seems not that surprising that private investors want to get rid of the assets in emerging-market currencies. Traders are waiting for actions from large hedge funds, which invest long-term, and they take longer time to make the decision. To recall, in 2013, we observed the plunge of the Brazilian real by 1.2% and the Turkish lira by 0.9% against the US dollar. Since in Brazil the problems were of economic character caused by inaction of the central bank, Turkey, besides the budget deficit, experienced political instability. At the same time, the India’s rupee and the South African rand was almost unchanged. The finance minister of India Palaniappan Chidambaram explains such stability of the rupee by early response by the government to the Fed’s decision. However, analysts at Capital Economics say that despite the fact that the strongest falls are behind, they expect weakening of the national currencies of such countries as Brazil, South Africa, India, and Turkey, where the problems are still unsolved.
