Newspaper article International New York Times

Calmer Day for Markets, but Japan Takes a Hit ; Dip in Hungarian Forint Indicates Small Currencies Are Still under Pressure

Newspaper article International New York Times

Calmer Day for Markets, but Japan Takes a Hit ; Dip in Hungarian Forint Indicates Small Currencies Are Still under Pressure

Article excerpt

But Asian securities moved downward, and many emerging-market currencies were under pressure.

Global markets settled back down Thursday, as a mixed day for stocks in Europe gave way to an upturn on Wall Street, where investors were buoyed by relatively strong economic growth in the United States.

But that followed a down day for stocks in Asia, and the uncertainties in emerging markets continued to put downward pressure on many of their currencies.

Japan had the opposite problem, as the strength of its currency was a factor in the 2.5 percent decline in the Japanese stock market, with investors fretting about the potential toll that a strong yen might be taking on the earnings of the country's export sector.

On Thursday, emerging-market currencies were mixed. The Turkish lira and South African rand had strengthened by the time the United States markets opened. The Indian rupee was modestly weaker.

In a sign that the distress in emerging markets is creeping closer to the developed world, the Hungarian forint, which is closely tied to the euro, has also come under pressure in the last few days. Investors were also nervously watching the Czech and Polish currencies.

The forint has fallen amid "some confusion in the market" from moves by the Federal Reserve in Washington, which continued on Wednesday to curtail its monetary stimulus program, said Peter Rona, an economist in Oxford, England. Mr. Rona sits on the supervisory board of the Hungarian central bank, which he visits often, though not its monetary policy committee.

The Hungarian central bank cut its main interest rate target last week to an all-time low of 2.85 percent and hinted that it might cut again, to as low as 2.5 percent. Mr. Rona said the move had reduced the attractiveness of Hungarian short-term investments relative to those of other countries that are perceived as significantly safer. That, he said, led to an outflow of funds.

"The central bank probably overplayed its hand," Mr. Rona said. …

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