India urges G20 swap lines to mitigate US tightening
19/09/2014 12:41
Amidst fears that the withdrawal of unprecedented stimulus by the US Federal Reserve may lead to volatility in capital flows in emerging markets, India is pitching for the creation of currency swap lines among G20 nations to overcome the adverse impact of monetary tightening in the world’s biggest economy.
In recent months, the Fed’s decision to taper stimulus has impacted the currencies of many emerging countries including India as foreign investors cut exposure to risky assets.
“The currency markets of many of the emerging market economies," Finance Secretary Arvind Mayaram said.
"We should also be discussing G20 driven collaborative solutions which would reduce the impact of the possible near term repricing, Mayaram added.
"... in order to ensure that the growth outcomes are still achieved, are there solutions that G20 can explore? Are swap lines a solution? Let us get the IMF to analyse whether it is so," he said.
While the Fed this week maintained its commitment to keep interest rates at low levels for a considerable time, it warned markets to brace for a steeper hike in US borrowing costs by late next year, a move which may lead to capital outflows from emerging markets as US debt becomes more attractive while liquidity wanes.
The currency swap arrangement, will act as hedge against foreign exchange exposure among G20 nations, thereby mitigating risks for emerging markets and global growth in the event of US monetary tightening.
19/09/2014 12:41
Amidst fears that the withdrawal of unprecedented stimulus by the US Federal Reserve may lead to volatility in capital flows in emerging markets, India is pitching for the creation of currency swap lines among G20 nations to overcome the adverse impact of monetary tightening in the world’s biggest economy.
In recent months, the Fed’s decision to taper stimulus has impacted the currencies of many emerging countries including India as foreign investors cut exposure to risky assets.
“The currency markets of many of the emerging market economies," Finance Secretary Arvind Mayaram said.
"We should also be discussing G20 driven collaborative solutions which would reduce the impact of the possible near term repricing, Mayaram added.
"... in order to ensure that the growth outcomes are still achieved, are there solutions that G20 can explore? Are swap lines a solution? Let us get the IMF to analyse whether it is so," he said.
While the Fed this week maintained its commitment to keep interest rates at low levels for a considerable time, it warned markets to brace for a steeper hike in US borrowing costs by late next year, a move which may lead to capital outflows from emerging markets as US debt becomes more attractive while liquidity wanes.
The currency swap arrangement, will act as hedge against foreign exchange exposure among G20 nations, thereby mitigating risks for emerging markets and global growth in the event of US monetary tightening.
