1 Dollar flourishes, emerging market currencies struggle (Linda Yueh on BBC) From the South African rand to the Brazilian real to the euro, currencies are weakening to the lowest levels in over a decade against the dollar. The dollar, measured against a basket of its trading partners, has reached the highest level since 2003 – the last time that it traded at parity with the euro.
Of course, it’s not just the dollar strength. Currencies trade in pairs, so it also partly has to do with the euro’s slide as the European Central Bank launched quantitative easing, or QE, for the first time on Monday.
The weakening of emerging-market currencies also reflects structural weaknesses such as large external deficits which were last highlighted during the so-called “taper tantrum” a couple of summers ago. That was when the Fed first hinted that its QE programme would end, and investors left the economies that were seen as risky and returned to safer destinations to park their money.
Cheaper commodity prices is a key difference between 2013 and now. Oil prices plunging and other commodities also dropping in price have helped not just inflation but also reduced the trade deficit. But, the reverse side of that is the commodity exporters. Brazil and South Africa are facing outflows of capital as their currencies have respectively hit their lowest levels in 11 and 13 years.
Indonesia’s growth is also affected since commodities account for two-thirds of exports and the rupiah had hit its lowest level since 1998, which was the tail-end of the Asian financial crisis. From China to South Korea, 17 central banks have cut interest rates this year to boost their economies. Investors are also anticipating a rate rise in the US, so the gap makes the dollar even more attractive.
2 India millionaires leaving in droves (Eric Bellman in The Wall Street Journal) India may have been minting millionaires at an unprecedented rate over the past decade, but it has also seen many of its seven-figured-citizens escape to other countries.
The latest Knight Frank’s annual Wealth Report estimates that more than 43,000 Indian millionaires left the country to settle elsewhere in the past 10 years. That is second only to China, which saw a private-plane drain of more than 76,000 people, according to estimates from property company Knight Frank and immigration consultancy Fragomen.
While Indians tended to take their railway cars full of rupees to other English-speaking countries, government restrictions have slowed the flow of Indian millionaire money in recent years, said Liam Bailey, global head of research at Knight Frank
China lost the most rich migrants as 76,200 of its millionaires left to settle in places like Hong Kong, Singapore, the US and Australia. After the two billion-person emerging markets, the biggest losers in terms of millionaire migrants were France, Italy, Russia, Switzerland and Indonesia. You wouldn’t think the rich and famous would be so anxious to leave Europe but apparently high taxes on the high earners encouraged many to leave.
In terms of the countries that attracted the most millionaire migrants, the UK was the leader by a huge margin. Around 114,000 rich folks from elsewhere settled in the quaint island nation during the 10 years through 2014. It was followed by Singapore, which attracted more than 45,000 new, rich citizens, the US, which welcomed 42,000 elite expats and Australia, which became home to 22,000 rich newcomers.
3 Countries have feelings too (Gideon Rachman in Straits Times) Just before Mr Alexis Tsipras was elected Greek Prime Minister in January, he made a vow to the voters: “On Monday, national humiliation will be over. We will finish with orders from abroad.”
Anyone tempted to dismiss this stress on national humiliation as a Greek eccentricity should look around the world. When I think about the international issues over the past year – Russia, the euro zone, the Middle East and East Asia – a theme that links them is the rhetoric of national or cultural humiliation.
One of Mr Tsipras’ first acts as Prime Minister was to visit a memorial to Greek resistance fighters executed by the Nazis in World War II. This gesture was all about national pride: reminding voters of past heroism while inflicting a little return humiliation on the Germans, who led the pack of euro zone creditors.
The Greek government came into office promising to slash the country’s debt and ditch economic austerity. But even though Mr Tsipras’ left-wing Syriza party’s confrontational approach did very little to achieve these goals, voters enjoyed the show of defiance. Syriza’s poll ratings went up, even as deposits in Greek banks shrank.