Weekly Commentary: New World Disorder

The Federal Reserve is flailing and global currency markets are in disarray. Notably, the Brazilian real dropped more than 10% in five sessions, before Thursday’s sharp recovery reversed much of the week’s loss. This week the Colombian peso dropped 3.0%, and the Chilean peso fell 3.1%. The Mexican peso dropped 1.9%. The Malaysian ringgit sank 4.5% for the week, with the South Korean won down 2.7% and the Indonesia rupiah losing 2.2%. The Singapore dollar fell 1.8%. The South African rand sank 4.4% and the Turkish lira fell 1.4%. Notably, market dislocation was not limited to EM. The Norwegian krone was hit for 4.4%, and the Swedish krona lost 2.0%. The British pound declined 2.3%. The Australian dollar also lost 2.3%.

Apparently alarmed by the market’s poor reaction to last week’s no hike decision, the Ultra-Dovish Fed this week attempted to slip on a little hawk attire. It’s looking really awkward. On Thursday evening, chair Yellen did her best to backtrack from last week’s FOMC statement with its focus on global issues. The markets are doing their best not to panic.

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