Many developing countries have expressed their concern over the rapid appreciation of their respective currencies because of the monetary easing policy of US and Japan’s way of spurring the demand of high-yield assets. It seems that Thailand has joined this long list now. Today, the major currency of this Asian country, Baht jumped up to a 17-month high figure. This made the Finance Minister of the country, Kittiratt Na-Ranong, comment that the exchange rate is not at a good level currently. He added that the exporters because of such high values of Baht will face trouble ahead. These comments of the Finance Minister however played an influential role in declining the currency a bit, at later part of today. According to reports, the JPMorgan Asia Dollar Index is currently going toward its 8-month high and currencies of different emerging countries such as Romania, Columbia and Poland have surged to their highest value in last 1 year.
Koji Fukaya, the Former Chief Strategist of Foreign Exchange Department of Credit Suisse Group, stated that the risk appetite of the investors is on a growing note in 2013 and as the developed countries are supplying good amount of liquidity, it is obvious for the emerging market currencies to face appreciation pressure. He added that the monetary authorities don’t seem to be interested in guiding the weaker currencies; however, they are worried because of the pace of the appreciation.
Incidentally, the Federal Reserve has expanded the monthly asset purchase program of it, starting from the 1st day of New Year. This has resulted into boost of US currency’s supply. On the other hand, in an attempt to end deflation in Japan, the new Prime Minister Shinzo Abe is looking forward to implement a bold monetary easing policy. The Central Bank of Russia has already warned that the world may see a fresh currency war in near future.
It’s not that the emerging countries are not taking any step to put a hold on all these surges. The Czech Republic Government has threatened to intervene soon so that Koruna, the major currency can be weakened. On the other hand, the Financial Chief of Columbia has asked Central Bank to step up the overall Dollar purchases. Countries such as Philippines and South Korea have also stated that in future, they may restrict the capital inflows.