Rupee Depreciation: Causes and Consequences

By Kavaljit Singh | Commentary | July 9, 2018

On June 28, 2018, the Indian rupee plunged to an all-time low of 69.10 against the US dollar amid growing concerns over tightening of global financial conditions and higher crude oil prices coupled with the worsening of domestic macroeconomic variables especially the current account balance and inflation.

The mad rush for dollar by importers and currency speculators was halted temporarily after the central bank, Reserve Bank of India, aggressively intervened in the currency markets by selling dollars in both spot and forward markets to arrest the slide in the rupee. If the RBI had not intervened in the currency markets on that day, the rupee…

Argentina’s Peso Crisis, Capital Flows and Financial Fragility in Emerging Markets

By Kavaljit Singh | Commentary | May 11, 2018

On May 4, the Banco Central de la Republica Argentina, the country’s central bank, raised policy interest rates to a whopping 40 percent to stem the rapid depreciation of the national currency, the peso. The surprise rate increase was the third in a week after the central bank failed to halt the decline in the peso by spending $4.3 billion of foreign exchange reserves in just one week. In addition, the Argentine authorities reduced fiscal deficit target and announced new measures to calm the markets.

Market observers were confident that rapid-fire rate hikes and other measures will restore currency stability, but the Argentine peso plunged…

First Quarter, Second Thoughts

By Shalini Bhutani | Commentary | May 7, 2018

There is no clear picture emerging with respect to trade relations amongst countries. But it is much clearer that countries like USA that pushed ‘free trade’ are now having second thoughts about how open they want their economies to be. While protectionism is re-emerging stronger than before, new free trade agreements (FTAs) continue to be in the making.

There have been developments in the first quarter of 2018 both in Asia and Africa, which are important to recap here. Some new acronyms, like CPTPP & AfCFTA, have been added to the world’s list of trade rules. It is also important to know of any spillover…

Trump’s Steel and Aluminium Tariffs: What are the Bigger Risks?

By Biswajit Dhar | Commentary | March 12, 2018

US President Donald Trump has finally taken the steps that he was threatening to right from his campaign days, namely, to block imports to trigger revival of the American manufacturing sector. He implemented the extra-ordinary decision to impose import tariffs of 25% and 10% on steel and aluminium, by invoking the provisions of Section 232 of the Trade Expansion Act of 1962. This provision allows the Administration to take measures to protect domestic industries for “national defense” and “national security”.

President Trump’s action was backed by an investigation conducted by the Bureau of Industry and Security of the US Department of Commerce, the report of…

The Brexit Conundrum: What to Do With Financial Services?

By Kavaljit Singh | Commentary | December 26, 2017

At the European Council summit held at Brussels during December 14-15, 2017, the EU leaders formally approved negotiating guidelines to move to the second phase of Brexit negotiations after confirming “sufficient progress” had been achieved in the first phase of negotiations. On December 8, the UK and the European Union reached a withdrawal deal concerning three key issues – citizens’ rights, the Northern Irish border and the payment of what Britain owes the European Union (the “divorce bill”).

After failing to make headway on Brexit negotiations for nearly eight months, the UK government entirely accepted what the EU had demanded in the first phase thereby…