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Jamal Mecklai

Articles By Jamal Mecklai

144 Articles

The next step down? Stage is multiply set for a weaker rupee

Perhaps, it makes sense for RBI to save its powder to intervene after the rupee’s next step down

And, given RBI’s gigantic war chest—over $575 billion of foreign currency assets, plus a further $50 billion or so of forward purchases—it should be well positioned to hold off any attack.

Saving money on euro imports

It is important to recognise that since EUR-USD is the deepest and most liquid market, there can be no arbitrage between hedging forward on Day 1 and any other fixed hedge strategy

euro imports

Lessons from Switzerland: Taxing capital is the only sensible way to increase growth and reduce inequality

The home of global private banking and a country with the second-highest net financial assets per capita recognises that taxing capital is the only sensible way to increase growth and reduce inequality

Switzerland is a small country in the scheme of things, but the idea of taxing capital is being very loudly bruited about globally—perhaps, this will be the thin end of the wedge that opens the issue up more widely. (Representative image/ Reuters file photo)

So, what’s with crypto-X?

The father of crypto-X is the continuing failure of governments and central banks to protect the value of investors’ capital

Despite some efforts at restraining this beast after the 2008 crisis—the Dodd-Frank Bill, since emasculated—it is noteworthy that large US banks today are even more exposed to derivatives than they were before the crisis.

How important is the Fed for the rupee?

Taper II could see modest outflow of portfolio debt investments, but the amount is unlikely to materially shift the balance

More and more analysts forecast this to happen towards the end-2021.

The beginning & the end of LIBOR

Companies need to adopt the fall back language of ARRC and sign the ISDA 2020 IBOR Fallback Protocol

While dollar LIBOR will continue to be quoted after 2021, it will cease to exist after June 2023, regulators everywhere require amending of existing contracts linked to LIBOR as benchmark rate to incorporate the new ARRs, with effect from January 1, 2022.

More evidence that markets don’t work

If it did, frontline workers—healthcare professionals, gig-workers, logistics workers, etc— would have been paid better, not merely applauded during the pandemic. Thankfully, in the West, the trend is towards unionisation

The truth is the only thing it reduces is corporate profits; the flip-side is that it increases growth significantly in the largely consumer-spending driven economies we have today.

Is God a technical analyst?

Whether the rupee will plunge towards 80 or will remain well bid is anybody’s guess

rupee

An imagined past is the future

Globally, driven by young people and, now, institutions, there is an amoeba-like movement afoot for cultural change

Managing FX risks on imports

While the premiums are, in general, higher than the average depreciation, they are substantially lower than the worst depreciation (to tenor) that we have seen over the past 10 years

Let us pray: RBI needs to pull out all the stops to prevent another sharp drop in the rupee

The rupee, on the surface, appears to be playing its own game. Since the start of 2020, it has taken two major hits, each one triggered by the Coronavirus; in both cases, it felt like the bottom was about to fall out, bringin

Shaktikanta das, RBI MPC, RBI, interest rates

Can Reserve Bank of India win this war?

The market believes the rupee needs to be weaker. To ensure that this battle doesn’t turn into a crisis, more than just intervening heavily, RBI needs to tell the market in no uncertain terms that it is willing to sell more

On the other hand, many health analysts believe this wave will peak sometime over the next month or so, assuming that the people and the government begin to behave sensibly—both relatively tall orders.

How much longer can the rupee stay strong?

Over the past year, the rupee has already strengthened by around 4% against the dollar, while most emerging market currencies have been broadly steady or somewhat weaker

investment

Will interest rates continue to rise?

The bond markets are pushing the central bank around and it is hard to see how/when this will stop

Of course, as we have all learned over the years, markets can stay irrational much, much longer than any of us can stay solvent, so, I guess, as always, the only certainty is continuing high volatility.

Reserve Bank can enhance social harmony

RBI needs to require that all real estate lending contracts have a clause prohibiting lenders from advancing money to any borrower (developer) who discriminates

RBI

Look at those premiums go!

This is the best time for companies with a natural hedge to actively manage it by covering imports at the spot and selling the equivalent amount of exports forward to 3-months

Could Brexit heal the world?

With Brexit taking one of the most difficult hurdles out of the picture, the grand scheme of a “United States of Europe” will accelerate towards fruition

Again, Europe, like all other nations, has to grapple with immigration and assimilation.

The big lie

It is still a long time till 2024 and the lies will continue. But, so will the protests as more and more Indians have gotten over the TINA concern and are willing to stand up and act themselves

US capitol

Is inflation coming back?

If inflation is set to rise globally—contrary, by the way, to what most analysts expect—what would be the implications for equity markets and the rupee?

Well, if most analysts end up surprised, equity markets will obviously also be surprised; contrariwise, many analysts are, in fact, beginning to warn of a pull-back—a few, in fact, looking for Armageddon.

Here’s to a grand new year! Sensitivity, kindness and gratitude must be the loudest sounds we hear in 2021

As a result of the pandemic, tens—maybe hundreds—of millions of people stepped out to help others far more than they usually did

Indeed, the US is coming to grips with the fact that its economic system is failing badly.

Oh no, not again — another history lesson: Follow a systematic process for hedging your risk

Since 2014, the periods of strength have been shorter (354 days, on average) as compared to the period between 2006 and 2014 (502 days); correspondingly, the periods of weakness have been longer—the average since 2014 was 4

Currency Undercurrents: Another New Year’s Eve party?

RBI is losing the battle at preventing rupee appreciation, and the next couple of weeks could see some drama

The group will study all aspects of digital lending activities in the regulated financial sector as well as by unregulated players so that an appropriate regulatory approach can be put in place.

Pictures at an exhibition: Markets are generally anything but neat

Markets are generally anything but neat. Thus, exporters should continue to follow a systematic programme of hedging with a risk limit and regular hedges.

ruppe

Slow, steady steps to CAC

India needs to permit selected “other financial institutions” to access the FX market to a particular limit. This would increase both liquidity and volatility

Indeed, RBI Governor Das, at last week’s annual day function of the Foreign Exchange Dealers Association of India (FEDAI), spoke explicitly of “Capital Account Convertibility … a long term vision with short and medium term goals…”

Turning left is starting point of reducing inequality

The new voices that are demanding a stronger focus on—again—employment, education and health will perforce drive politics meaningfully to the Left

And, just as the discovery of a “successful” vaccine is turning the cycle of the pandemic, the longer cycle of increasing inequality—which has been running for over 40 years now—also appears to be coming to an end.

Is judgment day coming?

If this market collapse, as some fear, is the big one, it will be driven by a realisation that all the Fed’s horses and all the Fed’s men can do nothing to put the economy back on the rails again

The stock market tanked, with the Dow losing nearly 38% in a matter of a month.

Going beyond prejudice of ethnicity and pride of caste is the way ahead

Each of us needs to acknowledge our own prejudices, which are ultimately nothing but ignorance and fear

In a sense, this paraphrases Ambedkar, who believed that the only “real remedy for destroying discrimination is inter-marriage”. (File image)
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