Some developing countries pushed their currency to go down, with the central bank unusual to move out of the steps with a federal reserve to reduce interest rates.
Not only this real behavior change, interest rates are revealed when the currency is very weak.
Cutting interest rates when the currency is very close to the lowest record seems to be careless with a level of decline that has little attention to the suffering currency.
To enter this in the context, the Indonesian Philippine and Rupiah peso is very close to the lowest position achieved in the middle of the Asian financial crisis in the 1990s, while Indian Rupees and Yuan China have reached a new lowest record.
While Malaysia has kept the interest rate stable for 10 consecutive months, the ringgit is almost close to the lowest record.
Easier monetary policy in South Korea and Singapore has damaged the currencies of these countries at the point when the dollar is supported by reactions that avoid the risk of US import rates.
Turkey cut interest rates despite Lira’s weaknesses, while the decline in Mexican interest rates was to put pressure on the peso in the midst of a trade quarrel which increased the dollar versus the main currency which was far more fluid.
Small currency that is less liquid can collapse if their decline is facilitated by the policy of their central bank during the period when a lot of cash has been heading towards the security of the world reserve currency.
Source: Reuters
