Rupee, Ringgit to Lead Losses This Quarter, Top Forecaster Says

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India’s rupee and Malaysia’s ringgit will lead declines in Asian currencies this quarter as the global slowdown damps export demand, according to Oversea- Chinese Banking Corp., the most-accurate forecaster.The rupee and the ringgit, which led gains in the three months through September, will drop 2.5 percent and 2.2 percent against the dollar, respectively, by year-end, said OCBC, which had the closest estimates in the last six quarters as measured by Bloomberg Rankings. Westpac Banking Corp., the second-best, predicts Taiwan’s dollar will weaken the most with a loss of 1.9 percent. The two banks expect all of the eight most-traded Asian emerging-market currencies to decline.Enlarge imageA cashier counts Indian one hundred-rupee banknotes at an Oriental Bank of Commerce branch in New Delhi, India. Photographer: Prashanth Vishwanathan/BloombergThe Bloomberg-JPMorgan Asia Dollar Index climbed 1.7 percent last quarter, the most in two years, as the U.S., Europeand Japan stepped up measures to spur their economies. The Reserve Bank of Australia unexpectedly cut its benchmarkinterest rate by a quarter of a percentage point last week, while the Asian Development Bank lowered its growth forecast for Asia excluding Japan, saying deceleration in China and India was tempering earlier optimism.“The macro backdrop remains less than hospitable for strong Asian currency gains,” Emmanuel Ng, a Singapore-based strategist at OCBC, the country’s second-biggest lender, said in a Oct. 4 interview. “With the RBA setting the tone, we also expect regional central banks to continue to lean toward growth.”

Global Stimulus

Wells Fargo & Co., the third-most accurate forecaster, is more positive, predicting gains of 1.7 percent and 1.4 percent against the greenback for the Philippine peso and the ringgit, respectively. The San Francisco-based bank sees most Asian currencies rising by year-end, with only the Chinese yuan and the Taiwan dollar losing ground.The rupee advanced 5.3 percent against the dollar last quarter, followed by a 3.5 percent appreciation in the ringgit and a 1.9 percent gain for the Taiwan dollar. India’s currency has since advanced 1.8 percent to 51.9350, Malaysia’s strengthened 0.3 percent to 3.0530, while Taiwan’s weakened 0.1 percent to NT$29.368.Analysts were ranked according to the accuracy of their estimates in each of six quarters beginning with the three months through June 2011. To test long-term accuracy, Bloomberg added one annual forecast made on Sept. 30, 2011 for Sept. 30 this year.The Asian Development Bank cut its growth forecast for the region to 6.1 percent this year and 6.7 percent in 2013, compared with previous estimates of 6.6 percent and 7.1 percent. The European Central Bank is ready to start buying government bonds, President Mario Draghi said last week. The Federal Reserve announced a third round of asset purchases, or quantitative easing, last month and the Bank of Japan also stepped up its note-buying program.

Fed Impact Fading

http://www.bloomberg.com/news/2012-10-07/rupee-ringgit-to-lead-losses-this-quarter-top-forecaster-says.html

Turning Iran’s Currency Crisis Into a Revolution

Amid the usual hyperbolic conspiracy theories, Iranian President Mahmoud Ahmadinejad said something incisive in a televised address last week: that the West is waging economic “war”against Iran.He’s right, and the Iranian rial’s death spiral is the first clear sign that we’re on a path to victory. The 40 percent drop by the rial against the dollar since late September is a symptom of larger woes: oil exports are at 1 million barrels a day, down from 2.2 million last year; quarterly oil revenue is down by about $15 billion a quarter; inflation, officially at 25 percent, is probablycloser to 70 percent; unemployment is probably three times higher than the official 12 percent; and the country has been hemorrhaging foreign-currency reserves, which were estimated at about $110 billion at the end of 2011.Critics of sanctions will point out that this economic pain hasn’t softened up the Tehran leadership’s hard line on its nuclear program. Iranian officials said Oct. 2 that if current negotiations falter, they plan to enrich some of its current 20 percent-pure uranium to 60 percent purity as fuel for a (nonexistent) nuclear submarine fleet, bringing it closer to the 90 percent level necessary for a weapon.Ignore such bluster: The real test of sanctions’ impact can be seen in the riots outside Tehran’s main bazaar and elsewhere in recent days. These weren’t the first signs of public discontent over the government’s handling of the economy. A wave of strikes happened this summer; a trade-union group complained to the government that despite staggering price increases, “worker’s wages … have gone up by only 13 percent.” (The regime responded by imprisoning labor activists and sentencing them to lashings.) There’s been political fallout as well. Parliament Speaker Ali Larijani said last week that the Ahmadinejad government was responsible for “80 percent” of the economic woes.The idea behind tightening the screws is not that we expect the regime to see the error of its atomic ambitions. Rather, it is to stress the economy to the point that Supreme LeaderAyatollah Ali Khamenei realizes he can no longer afford to see his people punished for such nuclear dreams.In that quest, the West might have tapped out the oil barrel. Perhaps the U.S. could expend diplomatic and political capital to get greater cooperation from a few of the countries it says are making “significant” reductions on Iranian oil imports, such as India, Japan, South Korea and perhaps China. But pushing Iranian oil sales much below their current monthly level will be tough.Instead, it’s time to broaden the war to other fronts: targeting the entire Iranian energy sector, making it even harder for companies to sell any nonhumanitarian commercial goods to Iran, and seeking to deplete or freeze the regime’s remaining foreign-currency reserves.Iran’s skyrocketing inflation stems partly from a drop in imports, which has made meat a luxuryand forced the government to stockpile wheat from eastern Europe and India. This is the real-world effect of U.S.-led efforts making it more difficult for companies to do business with Iran’s central bank. How to turn up that pressure?First, the U.S. and European Union should expand sanctions to all Iranian financial institutions. When European leaders meet in mid-October to discuss Iran, they should agree to end exceptions that allow Iran’s central bank to use reserves it holds in European banks for some commercial trade. It should also ban the so-called U-turn transactions that landed Standard Chartered Plc (STAN) in hot water with New York state authorities.http://www.bloomberg.com/news/2012-10-07/turning-iran-s-currency-crisis-into-a-revolution.html