This Is Not A Drill: India, Russia And Thailand Prepare For Currency War

Tyler Durden's picture

When China sneezes, the world catches a cold. Alternatively, when China devalues, the rest of the (exporting) world scrambles to not be the last (exporting) nation standing, and to do so next, before everyone else does.

Case in point, at least three major emerging market nations announced they are bracing for currency war.

First India, where NDTV ask rhetorically "How China's Devaluation of Renminbi Impacts India" and answers:

1) The Indian rupee slipped to a two-month low of 64.26 against the US dollar on Tuesday tracking the devaluation of the renminbi. Other currencies such as the Australian dollar and the South Korean won also lost ground.

 

2) The over 0.5 per cent fall in the rupee weighed on traders' sentiments, resulting in a drop in equity markets. Both the BSE Sensex and the Nifty traded with 0.4 per cent losses.

 

3) According to SV Prasad of Chime Consulting, renminbi's devaluation may push the Reserve Bank of India to cut interest rates in India. Lower interest rates will put off foreign investors and will further weaken the rupee, he added.

 

4) However, fund manager Sandip Sabharwal said India should not be too worried about the devaluation in renminbi. "Analysts are out with predictions of how a 1.5 per cent fall of Chinese currency will lead to a sharp increase in dumping etc. However the Indian rupee has also fallen nearly 0.8 per cent in sympathy and is now down 5 per cent over the last one year. It is hard to see a major impact of this on Indian stock markets or the economy unless yuan depreciation becomes a trend which seems unlikely at this stage," he said.

 

5) A fall in the value of the rupee is good for Indian exporters and sectors such as IT and pharma are seen gaining from the depreciation in the rupee. IT stocks were the top performers in stock markets today. However, China-focused Indian companies saw selling pressure because the devaluation of renminbi will make imports costlier in the country. As a result metal stocks saw selling pressure and underperformed broader markets.

Then there is Thailand, where the senior executive vice president of the Stock Exchange of Thailand, Pakorn Peetathawatchai, said that "China is a very important market and a weaker yuan makes our exports there more expensive." He added that weaker yuan also increases travel costs for Chinese tourists.

Well, yes, it's called "war" for a reason.

Finally, there is Russia whose economy is already in a tailspin now that the dead cat bounce in oil has ended, and where moments ago RIA said that the Yuan devaluation puts pressure on RUB, other EM currencies.  Still, the Russian Economy Ministry sees no domestic factors for ruble devaluation, RIA adds even as it admits crude prices to stay under pressure in 2015.

We give Russia, Thailand and India (as well as the rest of the EM countries, actually make that all countries, the US included) at least a few days (hours may suffice) before they all realize that in a beggar-thy-neighbor global currency war, where the ZIRP (or NIRP) liquidity trap is already stalking at least half of the entire world, there really is no choice.

Expect a dramatic surge in interest rate cuts over the next several weeks as the rest of the world realizes this is not some bad dream and responds, and the tit-for-tat FX defection regime (also known elsewhere as "war") goes thermonuclear.

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katchum's picture

The U.S. will prove that a strong currency is a good thing.

Headbanger's picture

"We shall go on to the end. We shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our island, whatever the cost may be. We shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender"

 

NEVER GIVE UP!  NEVER SURRENDER!

Vampyroteuthis infernalis's picture

Fire up the prining presses! We will show them how to win the race to the bottom!!!

MillionDollarBonus_'s picture

#Why Gov?

Looking for a career? Why not consider working for the government?

Theresa Philips

Logistics Administrator, Post Office

"What I love about my job is that every day is different. One day I'll be liaising with the drivers to make sure packages are on track to their destinations, and the next day I'll be interacting directly with customers in order to ensure their details are entered correctly into our system. The best part of my job is knowing that I make a real difference to peoples' lives every day."

 

Visit www.accredited-times.com to find out more about employment opportunities in local and Federal government.

Oracle of Kypseli's picture

My friend works for .gov and when asked him how he likes it he said that he is lazy and does not really work hard and he will also get great benefits, early retirement and fat pension. he also confided to me that he has been using his .gov CC in strip clubs. Unbeatable

 

Was'nt Teresa Phillips that attempted suicide twice?

Gaius Frakkin' Baltar's picture

Ruh-roh, all those fake-ass plastic Green Shoots are starting to dissolve under the enormous pile of fucking Bullshit.

Closet Boy's picture

"He has been using his .gov CC in strip clubs."

 

Like a sore dick, it can't be beat! Viva Governo!

Steve in Greensboro's picture

I voted down MDB’s latest extrusion, but he is right. 


If you want your children to have a job from which 1) from which they can never be fired, 2) from which they can retire at 55, 3) in which they will never, ever actually have to work very hard and 4) from which they can extract wages and retirement packages substantially above market rates, tell them to “get a government job” as the admirable John Derbyshire has said.

 

I do not like that MDB is right.

lordkoos's picture

Or they can just inherit money for a living... it works for many.

BaBaBouy's picture

Simple Money Class 101... Phys GOLD Up, Sundry Manipulated Digital Paper Fiats Down...

mkkby's picture

Stop fucking lying.  Did the USD go down 500% from 1999 to the peak in 2011?  And then up almost 50% to today?  Obviously not.

Nobody really knows what gold is any more.  It hasn't been money since 1971.  Maybe it will be in the next system.  We'll see.  Right now it's just a paper commodity traded by gambling specs.

mtl4's picture

This will be all about money flows and confidence, not who can issue the most QE or messing with currency pegs (which are always destined to fail).

Oracle of Kypseli's picture

In 1999 Krugman wrote a paper about Japan's liquidity trap then.

Is this what he is preaching now?

http://web.mit.edu/krugman/www/trioshrt.html

Article is too long. here is the concluding part:

The whole subject of the liquidity trap has a sort of Alice-through-the-looking-glass quality. Virtues like saving, or a central bank known to be strongly committed to price stability, become vices; to get out of the trap a country must loosen its belt, persuade its citizens to forget about the future, and convince the private sector that the government and central bank aren’t as serious and austere as they seem.

The strangeness of the situation extends to policy discussion. Because the usual rules do not apply, conventional rules of thumb about policy become hard to justify. We usually imagine that policy is more or less based on conventional models – in particular, that normally policy will be based on the simple, rather dull models in the textbooks rather than exotic stories that might be true but probably aren’t. In the case of the liquidity trap, however, conventional textbook models imply unconventional policy conclusions – for inflation targeting is not an exotic idea but the natural implication of both IS-LM and modern intertemporal models applied to this unusual situation.To defend the conventional policy wisdom one must therefore appeal to various unorthodox models – supply curves that slope down, demand curves that slope up, multiple equilibria, etc.. So unworldly economists become defenders of analytical orthodoxy, while the dignified men in suits become devotees of exotic theories.

What I hope that I have done in this paper is to make clear how conventional the logic behind seemingly radical proposals like inflation targeting really is, and conversely how hard it is to rationalize what still passes for sensible policies among many officials. Let’s see it it works this time around.

messymerry's picture

Ella koritsi,

Christ all feakin' mighty.  That guy belongs on Venus in a pantsuit...

;-D

 

teslaberry's picture

it's called war.

 

and everyone's balls to the wall is the strategy. the pawns are there to get killed just as the public is there to have it's money turned into dust via inflation. 

 

it is the nature of money and monetary warfare. money is a weapon wielded by the rulers, but it is held in the hands of the people. the quesiton really is who it is being wielded for and who against. and that IS A REALLY COMPLEX QUESTION. the asnwer is 'it depends'.

caconhma's picture

Anyone, without any exception, who ever won a Nobel Prize in economic exclusively funded by the Central Banks, was/is a great theat to Humanity and common people prosperity & freedom.

Theosebes Goodfellow's picture

Whoa there, buckaroos! So everyone knows that China has been cooking the books as far a fair trading rate for the yuan. And now they cook it a little more (1.9%) and the world gets their knickers in a twist?

The Chinese, (like everyone else), is desperate to "re-ignite" they global economy which America has screwed by printing 12 Trillion dollars or so in the last 7 years. Now the Chinese know that a smidge under 2% "fire sale" isn't going to reboot anything, (or at least we'd hope they know that a smidge under 2% fire sale isn't going to reboot anything). I suspect that this is a trial ballon. I bet you that the next devaluation will be more on the order of 5 to 10%. Then you can watch these other countries crap kittens. Go long popcorn.

post turtle saver's picture

notice that it's all about devaluation against the USD, because the USD to them represents the consumer of last resort...

boy are those fuckers in for a surprise...

lordkoos's picture

The Chinese middle class is the size of the entire American population... the USA is a big market, but it isn't nearly as important as it once was, and it's far from the only place with millions of consumers.

clawsthatscratch's picture

Careful Goodfellow, you may have a nailgun accident.

Hans-Zandvliet's picture

But, but, but, k,k,k,kaptain, the printing presses are already in overdrive!

DaveyJones's picture

I can't wait to waterboard someone in our currency war

I love paper mache

clade7's picture

Torture protocols in a currency war has been already established by the IRS...every small business owner knows this...they stuff rolls of pennies up your ass, then tell you to spit out quarters.

Handful of Dust's picture

" My FATCA is bigger then your FATCA! "

DaveyJones's picture

I prefer the old days

when they used ponies not pennies

to draw and quarter

SilvertonguedAngel's picture

All you get is three quarters for two copper penny rolls, 1 quarter for two zinc rolls.

 

Believe me I'm living proof.

I Want to Believe's picture

I can't tell if that's a pre-64 silver coin joke or a drug joke.

Oh regional Indian's picture

Whatever meta, super, micro or macro factors might be at play, India de-values ONLY (well mostly) to keep it's fast sliding IT industry alive.

Bangalore would see mass layoffs if Rupee/Thaler came to their true levels....

+ this is just the beginning, only the tip is in so to speak...

BTW the layoffs in the IT sector move apace inspite of the pathetic Rupee....

Lester's picture

Except Churchill is reported to have further stated to an aide, "But I don't know what we will fight them with...."

The Brits then appealed to US sportsmen for their personal firearms which were "loaned" to Brittain.  At the end of WWII, the Brits dumped the rifles Americans "loaned" them into the sea...

Remember reading all about this episode and the famous speech in The American Rifleman when I was a kid.  First of life's many lessons confirming Never Trust A Brit...

Consuelo's picture

As exemplified quite robustly today in Cameron's island in a silver sea, the Brits have a penchant for Tyranny... 

clade7's picture

I can imagine the poor limey pisser on the front line who got issued a homemade flintlock wondering WTH?... 

BigRedRider's picture

 

 

During WW2, the British complained that U.S. troops were overpaid, oversexed, and over here.  The Americans retorted by saying that the British were underpaid, undersexed, and under Eisenhower.

Abitdodgie's picture

Churchill was a pice of shit just like the rest of them, funny how he was not doing the dieing.

Farqued Up's picture

But.....what if your wife is a bull dyke should you quit? Or lemonade from a lemon, and push for a manage a trois?

caconhma's picture

You are all fucked up: never compare W. Churchill with a community organizer Obama. The Kenyan president is only good in destroying whatever still left from rich and prosperous America.

RockySpears's picture

To whom might they prove it?

 

Which strong currency were you thinking of?

 

Just curious.

Fahque Imuhnutjahb's picture

KING DOLLAR!!  We're #1.! We're#1,! We're #------ awww fuck it.

Dr. Engali's picture

This global eCONomy is on fire. Better raise rates and slow this steaming pile of shit down.

JustObserving's picture

Chinese, Indians, Russians and Thai are major buyers of gold.  Time for them to load up before the devaluations become a torrent.

How will this currency war end?  With trade wars? With a real war? Or about $10 trillion in new QE?

BoNeSxxx's picture

I'll take 'all the above' for $1,000 Alex