Horn
5th June 2018, 08:25 AM
What direction this goes should be revealing, momentum should not be reversed so easily.
The message from the current Reserve Bank of India, Urjit Patel, who writes;
"unlike previous turbulence, this episode cannot be attributed to the US Federal Reserve’s moves on interest rates, which have been rising steadily since December 2016 in a calibrated manner."
But does that mean that the Fed is not to blame for what increasingly looks like another budding EM crisis?
Not at all: according to Patel, the dollar funding shortage "upheaval" stems from what he sees as the confluence of two significant events of which the Fed’s balance sheet reduction is one, while the second is the dramatic increase in US Treasury issuance to pay for Trump's tax cuts; what is notable is that both events are drastically soaking up dollar liquidity.
https://www.zerohedge.com/sites/default/files/styles/inline_image_desktop/public/inline-images/turkey%20argentina.jpg?itok=ZdWL7wq6
https://www.zerohedge.com/news/2018-06-04/central-banker-observes-sudden-evaporation-dollar-funding-warns-global-turmoil
The message from the current Reserve Bank of India, Urjit Patel, who writes;
"unlike previous turbulence, this episode cannot be attributed to the US Federal Reserve’s moves on interest rates, which have been rising steadily since December 2016 in a calibrated manner."
But does that mean that the Fed is not to blame for what increasingly looks like another budding EM crisis?
Not at all: according to Patel, the dollar funding shortage "upheaval" stems from what he sees as the confluence of two significant events of which the Fed’s balance sheet reduction is one, while the second is the dramatic increase in US Treasury issuance to pay for Trump's tax cuts; what is notable is that both events are drastically soaking up dollar liquidity.
https://www.zerohedge.com/sites/default/files/styles/inline_image_desktop/public/inline-images/turkey%20argentina.jpg?itok=ZdWL7wq6
https://www.zerohedge.com/news/2018-06-04/central-banker-observes-sudden-evaporation-dollar-funding-warns-global-turmoil