MARRAKECH/NEW YORK/LAHORE (Reuters/Web Desk) – Currency market interventions by emerging market economies should not be viewed "as a black and white story", India's central bank governor told Reuters on Friday.
Reserve Bank of India Governor Shaktikanta Das was referring to the US Treasury Department's regular foreign exchange report and similar research by the International Monetary Fund (IMF).
Das called on the United States and other countries and organizations to review their use of "labelling like watch lists," underscoring that these comments were not directed solely at the Treasury.
"Emerging market economies will have to build reserves and central banks in emerging markets are required to intervene in the currency market from time to time to prevent excessive volatility," Das said on the sidelines of the IMF and World Bank annual meeting in Marrakech.
"So therefore any labelling, any kind of labelling of currency interventions should not be a black and white story and you need to look at the nuances of it."
A SORT OF INTERVENTION IN PAKISTAN
The Pakistan rupee closed the week at Rs277.62 against the US dollar after gaining another Rs1.06 in continuation of the trend being witnessed for more than a month, which translates into a Rs29.41 surge since the local currency slid down to the level of Rs307.10 against the greenback – the worst in Pakistan’s history.
Although Pakistan facing a severe economic crisis, the record depreciation experienced by rupee was a product of market manipulation – hoarding, illegal trading and cross-border smuggling – and the government has launched a successful crackdown on the elements involved in these practices.
WORLD CURRENCY MARKETS
The US dollar touched a one-week high against a basket of currencies on Friday, extending its gains from the previous session when hot US consumer prices data reinforced expectations that the Federal Reserve may have to keep interest rates higher for longer.
The consumer price index (CPI) rose 0.4 per cent in September, keeping the annual rate at 3.7pc, the same as in August, while economists polled by Reuters had forecast it would gain 0.3pc on the month and 3.6pc year-on-year.
Data on Wednesday had shown US producer prices increased more than expected in September amid higher costs for energy products and food.
"Traders didn't really believe in the hot PPI for September until CPI yesterday reinforced it," Helen Given, FX Trader at Monex USA, said.
"I see yesterday's big USD move as a correction to the under-reaction to PPI Wednesday," Given said.
The dollar index, which measures the US currency against six of its major peers, ticked up 0.11pc to 106.63. The index, which jumped 0.8pc on Thursday, its biggest one-day rise since March 15, finished the week up 0.5pc.
The dollar was also helped by safe-haven buying driven by the escalating Middle East conflict as Israel urged civilians to leave the northern Gaza Strip.
"Our sense is that the greenback’s renewed strength in large part also reflects growing economic and geopolitical uncertainty in the wake of the new war between Hamas and Israel," Jonas Goltermann, deputy chief markets economist at Capital Economics, said in a note.
Commentary from Fed speakers is likely to keep the dollar supported.
Federal Reserve Bank of Philadelphia President Patrick Harker said Friday he believes the central bank is likely done with rate hikes amid an ongoing waning in price pressures, while flagging the uncertainty of how long rates will need to remain elevated.
Data on Friday showed US consumer sentiment deteriorated in October, with households expecting higher inflation over the next year, but labor market strength was likely to continue supporting consumer spending.
Thursday's boost to the greenback saw the yen head back toward the sensitive 150 level it briefly touched last week before strengthening sharply, which led some to believe authorities were intervening in the currency market.
The Japanese yen was last up 0.21pc at 149.5 per dollar, with traders on guard for any signs of weakness.
"The risk of intervention is clearly high and that is constraining dollar-yen, which would otherwise be higher," said Adam Cole, chief currency strategist at RBC.
Sweden's crown edged up against both the dollar and euro after consumer price data came in higher-than-forecast, adding to risks that the Riksbank could raise rates further.
Investors also digested producer and consumer prices data out of China on Friday that showed deflationary pressures were slightly stronger than expected.
The offshore Chinese yuan was flat at 7.3114 per dollar.
The Australian dollar, which often trades as a proxy for Chinese growth, was last down 0.23% at $0.6299.
The Canadian dollar edged higher against its US counterpart on Friday as the price of oil, one of Canada's major exports, moved sharply higher and investors raised bets on another Bank of Canada interest rate hike later this month.