"Every church is a
stone on the grave of a god-man: it does not want him to rise up again under
any circumstances."
-Friedrich Nietzsche (German,
1844-1900)
Word for the day
Mondegreen (adj)
A word or phrase resulting
from a misinterpretation of a word or phrase that has been heard.
(Source: Dictionary.com)
Malice towards
none
It is a pity that AAP has
adopted "lying" as the principal weapon in their fight against
corruption.
Do not they know the basic
tenet of Satyagraha - "Goals are important, means are equally
important".
CNY devaluation to strengthen disinflationary forces
USD bull have another reason to rejoice besides the prospects of
Fed lifting rates from near zero level later this year - devaluation of CNY by
the Chinese central bank. USD has already surged over 20% in past 12 months,
according to Bloomberg Correlation-Weighted Indexes.
Chinese authorities must have been meaning to let the control on
CNY go as the data trade deteriorated over past few months. The action was
perhaps delayed to get entry in SDR basket. The deferral of a decision by IMF
to entertain Chinese request for CNY entry in SDR basket over weekend
"released the valve".
CNY has thus joined the currency war initiated by JPY & EUR
and unwittingly joined by competing currencies like KRW, IDR and AUD.
The latest move of PoBC shall add materially to the
disinflationary pressures, besides adding to the debt burden of USD borrowers.
For example, as per Bloomberg estimates CNY devaluation will add
US$10bn to Chinese companies' debt (see
here). In case of India, as at the end of 2014, ~US$185bn (Rs11,84,000cr)
worth of external commercial loans were outstanding for Indian non-government
borrowers. Out of these appx 60% were US$ denominated. It is difficult to
assess what is the un-hedged exposure of Indian corporate who have borrowed in
USD, but even a small un-hedged part could impact the balance sheets
materially.
Another cause of concern is that India's external debt profile
today is certainly worse than the financial crisis period of 2008. Debt is
higher, debt service ratio (annual debt payment to annual exports) is worse,
reserve are relatively lower, short term maturities are almost double than 2008
when compared to Fx reserve.
Sooner or later RBI will have to let INR go beyond the red zone of 64-65/per USD. The weak balance sheets already suffering from adverse business conditions and poor debt service ability would find it increasingly difficult.
(Source Ministry
of Finance)
On the positive side, the "IT & Pharma exporters"
trade could strengthen further, some MNC parents may find it attractive to hike
their stake in India operations or export from Indian shores.
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