When markets become risk averse, economies with high current account deficits-CAD often find themselves facing external financing pressure, the ratings agency said
Rating agency Standard and Poor’s (S&P) has cautioned that large deficit economies, including India and Indonesia could face more economic problems in the near term.
"The road may be rocky in the near term, particularly for the largest deficit countries--India and Indonesia--but we don't think this is the Asian crisis all over again," said Paul Gruenwald, chief economist for Asia-Pacific at S&P.
In a report titled ‘South and South-east Asian Economies Grapple with Growth and External Financing Risks’, the ratings agency said, the financial markets appear to be in the midst of pricing in a different path for US monetary policy. “During that process, we are likely to see bouts of volatility in emerging Asian economies, along with weaker currencies, lower asset prices, and subdued sentiment and growth. But, in our view, this is not a repeat of the 1997 Asian financial crisis,” it added.
Observing that in normal times the countries with high current account deficit (CAD) and high savings might not find it difficult to borrow in the international market, the report said: “when markets become risk averse, economies with current account deficits often find themselves facing external financing pressure.’’
India’s CAD rose to an all-time high of $88.2 billion or 4.8% of the GDP in 2012-13. During the current fiscal, the union government plans to bring it down to $70 billion or 3.7% of the GDP.
High CAD is also affecting the value of rupee, which slipped to an all-time low of 68.75 to a dollar in the intra-day trade.
On the positive side, the S&P report pointed out that domestically driven economies such as China, India, Indonesia, and the Philippines face lower growth risks than trade-dependent nations like Singapore and Hong Kong.
Gruenwald said, "The external positions for the emerging Asian economies are much stronger. The central banks are also not defending their exchange rates. In addition, the increase in leverage over the past five years has been moderate in the economies with high external risks".
“The smaller, more open, more trade-dependent economies in Asia, such as Singapore and Hong Kong, have higher growth betas, or risks to growth. In contrast, the larger, more domestically driven economies such as China, India, Indonesia, and the Philippines have lower growth betas,” the report added.
The report attributed the ongoing market turbulence largely to uncertainties around the timing of “tapering” (lowering bond purchases) by the US Federal Reserve, coincided with recent cuts in Asian GDP growth forecasts, most notably for China.
Since the announcement of US bond tapering, the rupee has declined over 20%. Besides, equity market barometer Sensex dropped nearly 10% in the last one month.
At least eight foreign currencies, including Isle of Man pound, Gibraltar pound and Jersey pound currently trade over the 100 mark against the Indian currency. While euro and Jordanian dinar are in 90s, there are about 50 foreign currencies trading at over 50 level against the rupee
Even as the Indian rupee’s record fall against the US dollar continues to hog the limelight, the domestic currency also lost ground and breached key levels against a host of other currencies including British pound, euro and Swiss franc.
Adding to the rupee’s woes, the British pound on Wednesday crossed 106 level, euro went past 92, Swiss franc touched 75 mark, Canadian dollar was at 65, Australian dollar at over 60, while New Zealand dollar, Singapore dollar, Bruneian dollar and Libyan dinar crossed the 50 level.
Among even more expensive foreign currencies, one Kuwaiti dinar is now worth more than Rs240, Bahraini Dinar over Rs180, Omani rial has gone past Rs175 and Latvia Lat Rs130.
Against the most prominent foreign currency US dollar, the rupee has fallen to a record low of 68.75.
Since May, the US dollar has appreciated by about 28%, amid aggravating concerns over flight of foreign funds from India due to weak domestic economic conditions and global headwinds.
Rupee’s fall has been the same or higher against a host of other foreign currencies including pound, euro, Swiss franc for the same period.
The plunge has been less sharp against a few like Australian dollar (10%), New Zealand dollar (16%) and Brazilian real (8%).
A few currencies against which the rupee has appreciated since May include those in countries like Panana, Tongo, Surinam, Tajikistan, Solomon Islands, Salvador, Haiti, Kyrgyzstan, Liberia, Syria, Congo, Somalia, Sierra Leon and Guinea.
An analysis of foreign exchange rates across the world shows that Kuwaiti dinar is the most expensive against the rupee at current level of close to 243, followed by Bahraini dinar (182), Omani rial (178) and Latvian lat (130).
Among the major foreign currencies, British pound is the most expensive and hit a record high of 106.91 this afternoon, followed by euro, Swiss franc, US dollar, Canadian dollar and Australian dollar.
At least eight foreign currencies currently trade over 100 mark, including Isle of Man pound, Gibraltar pound and Jersey pound. Besides, euro and Jordanian dinar are in 90s. At least 50 foreign currencies trade at over 50 level.
The number of foreign currencies having a value higher than rupee is at least 100, while those valued less than Indian currencies include those of Bangladesh, Liberia, Algeria, Serbia, Kenya, Angola, Japan, Nepal, Pakistan, Albania, Syria, Iceland, North Korea, Sri Lanka and Nigeria.
Currencies in countries like Guyana, Yemen, Hungary, Malawi, Zimbabwe, Costa Rica, Chile, Rwanda, Congo, Burma, South Korea, Iraq, Somalia, Lebanon, Burundi, Mongolia, Tanzania, Colombia, Uzbekistan, Uganda, Cambodia, Paraguay, Lao, Belarus, Indonesia, Iran and Vietnam also carry value less than one rupee.
The attack on major media organisations comes as the US weighs a limited military strike on Syria for allegedly using chemical weapons against its own people
The websites of the New York Times (NYT), the Huffington Post and Twitter were hacked by a group known as the Syrian Electronic Army, which posted messages supporting the embattled Syrian President Bashar al-Assad.
In a message posted on its website, the New York Times, said, “Our website was unavailable to users in the US for a period of time yesterday. The outage was the result of an external attack on our domain name registrar, and we are at work on fully restoring service”.
The attack on America’s major media organisations comes as the US weighs a limited military strike on Syria for allegedly using chemical weapons against its own people.
Frons said the attack was carried out by a group known as “the Syrian Electronic Army or someone trying very hard to be them“.
The Syrian Electronic Army is a group of hackers who support President Assad.
The NYT website first went down after 3PM (local time); once service was restored, the hackers quickly disrupted the site again. Shortly after 6 PM, Frons said that “we believe that we are on the road to fixing the problem.”
Matt Johansen, head of the Threat Research Centre at White Hat Security, posted on Twitter that he was directed to a Syrian Web domain when he tried to view the Times’ web site, the daily said.
“In terms of the sophistication of the attack, this is a big deal. It’s sort of like breaking into the local savings and loan versus breaking into Fort Knox. A domain registrar should have extremely tight security because they are holding the security to hundreds if not thousands of websites,” Frons said.
The Syrian Electronic Army also claimed credit for an attack on the Huffington Post UK’s site, and for hacking into Twitter’s registry account and changing information there.
In a statement, Twitter said it appears that for nearly two hours, records “for various organizations were modified, including one of Twitter’s domains used for image serving, twimg.com.”
The Syrian Electronic Army has frequently targeted the US news media. The group has hacked into the Twitter feeds of the Associated Press and The Washington Post, and on 15th August they briefly hacked the websites of several major news organisations, including CNN, redirecting them to a SEA page.