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»  Rajgama Heroes !
Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyYesterday at 12:06 pm by කිත්සිරි ද සිල්වා

» Coronavirus Updates
Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyYesterday at 7:26 am by The Invisible

» Thread for News on CSE and SL Economy
Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyYesterday at 7:17 am by The Invisible

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Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyYesterday at 7:14 am by The Invisible

» In the Meantime, Within Our Shores !
Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyThu Jul 02, 2020 10:35 pm by කිත්සිරි ද සිල්වා

» Obituary Notice.
Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyWed Jul 01, 2020 12:51 pm by කිත්සිරි ද සිල්වා

»  6000 Post Club , Celebration of a Great Milestone, Slstock
Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyTue Jun 30, 2020 9:35 am by slstock

» LIOC.N0000 (Lanka IOC PLC)
Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyTue Jun 30, 2020 8:00 am by LSE

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» 104 Technical trading experiments by HUNTER
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» CFVF - First Capital
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» RCL - Royal Ceramics
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» Stocks - Banks Drag Wall Street Lower After Fed Buyback Ban; Dow Down 290
Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyFri Jun 26, 2020 11:35 pm by nihal123

» Sri Lanka plans US$4bn PPP for LRT in place of Japan funded soft-loan project
Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyThu Jun 25, 2020 8:57 pm by The Invisible

» PABC.N0000 (Pan Asia Banking Corporation PLC)
Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyWed Jun 24, 2020 10:37 pm by seek

» JKH.N0000
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» Plantation sector updates
Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyWed Jun 24, 2020 10:32 am by The Invisible

» Dividend Announcements
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» LOLC Holdings
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» The Central Bank of Sri Lanka Further Reduces the Statutory Reserve Ratio
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» Sri Lanka tea prices pickup marginally mid June
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» Sri Lankans stock up, buy online in Covid-19 curfews, informal workers hard-hit: survey
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» Sri Lanka chicken supplies to tighten after Covid-19 crisis, maize import controls
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» S&P SL20 සමාගම් ලැයිස්තුවේ වෙනසක්.
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» HNB රුපියල් බිලියන 5ක ණය යෝජනා ක‍්‍රමයක් දියත් කරයි
Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyFri Jun 19, 2020 10:47 pm by nihal123

» SAMP.N0000 (Sampath Bank PLC)
Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyFri Jun 19, 2020 1:08 pm by dakzsl

» HAYC - Haycarb
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» විශාලම ලැයිස්තුගත සමාගම් 50 විනිවිදභාවය පිළිබඳ වාර්තාවක් එළිදැක්වෙයි
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» HAYL.N0000 Hayleys PLC
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» GLAS.N0000 (Piramal Glass Ceylon PLC)
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» Sri Lanka telecom regulator asked find businesses to use Lotus Tower
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» Gota's Era
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» Fitch Revises Ratings on 11 Sri Lankan Financial
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» Carlton Sports Network to resume broadcasts soon – Rohan Welivita
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» සල්ලි අච්චු ගැසුවාද?
Sri Lanka interest rates should go down, currency will not fall: Mark Mobius EmptyWed Jun 10, 2020 11:35 pm by nihal123

» වටිනා පාඩමක්!
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» AEL Access Engineering
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» Sri Lanka import controls, cargo bottleneck hit apparel exporters
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» HHL.N0000 ( Hemas Holdings PLC)
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Sri Lanka interest rates should go down, currency will not fall: Mark Mobius

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Sri Lanka interest rates should go down, currency will not fall: Mark Mobius Empty Sri Lanka interest rates should go down, currency will not fall: Mark Mobius

Post by The Invisible on Wed Dec 11, 2019 11:18 am


ECONOMYNEXT – Sri Lanka’s interest rates should go down, but the rupee will not fall, because the strength of the currency is based on confidence, not just rates, Mark Mobius, an emerging market investor said in a prediction.

“You have to reduce the interest rates,” Mobius, known as a emerging market guru, said at a forum in Colombo organized by Cinnamon Life, an 800 million US dollar real estate development promoted by Sri Lanka’s John Keells Holdings.

“You have to look at the global situation. Interest rates are moving down and are low.”

Prediction

He said some people said that if rates are lowered the currency will fall.

“No, the currency is based on confidence not only on interest rates,” he said. “Look at the US.”

The US however no longer has pegged exchange and is a free floating currency and the Fed does not inject base money (or withdraw) on interventions in the foreign exchange market.

The US dollar also collapsed in 1971 when the Fed injected money while trying to maintain a gold peg at 35 dollars an ounce.

Mobius’ comments came a day after Paul Volcker, the Fed Chairman who ended the stagflation created by the Fed after the gold peg collapsed, died. Volker raised policy rates to 20 percent to end 14 percent inflation, sending oil and gold prices crashing down.

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Sri Lanka can resume high growth path, cut more taxes: Mark Mobius



Sri Lanka invites more investments, tourists from China



John Keells Holdings drags down Sri Lanka stocks



Sri Lanka tourist arrivals to recover by end of winter season: CB Deputy Governor



Sri Lanka bad loans expected to fall after tax cuts: HNB














Paul Volcker, the man who tamed the Fed, dies at 92

Currency crises are faced by soft-pegs, which collect foreign reserves by intervening in forex markets, not free floating regimes.

Currency boards or hard pegs (where short term rates float) also do not face currency crises and ‘foreign exchange shortages’.

No Forex Reserves

However in an about turn, Mobius himself admitted that he looked at forex reserves when investing in emerging markets.

Central banks of countries like the US did not have foreign reserves and most gold and forex reserves were owned by emerging market countries, he said.

He said at one time he could not exit from Nigeria. Nigeria is an oil producing country with a bad central bank.

Mobius said he was told that there were no foreign exchange reserves and he was told to wait and he had to wait.

The Nigerian currency the Naira was set up with a central bank in 1972, replacing the pound at 0.6 to the US and it has fallen to about 360 so far.

The soft-peg with the US dollar operated by Sri Lanka’s central bank has the worst record among South Asian monetary authorities, falling from 4.70 to 182 since it was created in 1952.

The central bank’s soft-peg has dragged the country and the Treasury to the IMF 16 times so far.

Pakistan is next the next worst central bank with the rupee falling to 155 from 4.70 to the US dollar. Bangladesh is next, but has kept monetary stability for almost a decade with the Taka at around 80 to the US dollar, giving a stable foundation for a period of strong growth.


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The best performer is the Maldives Monetary Authority, whose dollar peg has fallen to only 15.

Dubai which also had Indian rupees now has a currency which is 3 to the US dollar, and has no independent monetary policy, with a currency-board like system. (Colombo/Dec10/2019 – Update III)
The Invisible
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