Failure to taper restores cheer among emerging countries. The Fed's surprise decision not to phase out the stimulus to the US economy gave a respite to investors and, above all, to those currencies that were facing the worst free fall in two years.
“It was a breath of fresh air,” Denise Simon, emerging markets expert at Lazard Asset Management, who manages a $147 billion portfolio, told Bloomberg. “Certainly the move has taken some pressure off the most vulnerable countries.”
The Brazilian real and the Turkish lira gained more than 2% yesterday, while the Indian rupee - after a long phase of slump - showed some positive signs today in Asia. The Indonesian composite index achieved its best performance since October 2011 (+4,4%) and JP Morgan's index of dollar bonds in developing nations accelerated the fastest in the last three months. The change of course came immediately after the statement that the Federal Reserve would continue to buy 85 billion dollars of debt a day.
The decision, which comes just as economic data from China and Brazil show signs of improvement, lends a helping hand to states that are more reliant on foreign investment, such as the aforementioned Brazil and India.
In detail, the rupee strengthened by 2,6% against the dollar and the Thai bath recorded a +2,1% and is now aiming for the best increase in the last six years. The Malaysian ringgit marks a +2,3%
The currency that has benefited the most from the decision appears to be the real, which gains 3,2% against the dollar. The South African rand also did well (+2,2%), experiencing its best month since May 2009.
The Brazilian Ibovespa rose by 2,6% and thus extended its growth to more than 20% from the bottom reached in July.
