hello and welcome back
we've had another day of nervous
excitement ahead of next week's a
meeting of the Federal Reserve oil
continues to hit new lows the brent
price dropped below forty dollars a
barrel today stock markets were
decidedly mixed around the world the SP
here in the States appeared to be headed
for a good day but gave up most of its
gains by the end but I think the
critical forum for today has been
foreign exchange particularly in the
emerging markets what we're looking at
here is JP Morgan's emerging markets for
an exchange index which covers nine
major foreign currencies of emerging
markets and it's dropped to a new low
since its inception critically it's
lower than it was back in September at a
point when the pressure for some
emerging market currencies seemed to
force the feds to pass on raising rates
if we take a look particularly at South
Africa where they are in something close
to crisis over the decision to remove
their finance minister you can see that
this is now a very dramatic new record
low for the round against the dollar
which could create very serious impacts
perhaps more important for the feds
however we need to look at the
currencies of America's two neighbours
Canada and Mexico we don't normally
think of those two countries as having
much in common belong beyond their
borders with the US but as you can see
their currencies have been treated by
the markets almost as though they're
identical for the last two years in the
case of the peso at one point today was
on course for its lowest close against
the dollar ever narrowly avoided that
but it really does have a dilemma the
Mexican central bank will be meeting the
day after the feds on Friday of next
week everyone assumes or had assumed
that they would have to follow through
with a with a rate hike to defend their
currency but if we take a look at
mexican inflation now plainly mexican
inflation is normally regarded as a
problem for being too high their target
is actually three percent their
inflation is dropping very significantly
it's hard to see even if the Fed hikes
it's hard to see
how Mexico can respond with a hike of
its own with inflation falling like that
at home this is only one of many
dilemmas we are likely to see around the
world if the Fed does raise rates we
have interesting times ahead of us