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US rate hike: the global impact

Thursday, December 17, 2015 - 01:46

Markets breathe a sigh of relief after the Fed hike, but for many economies around the world, the hike may prove a mixed blessing. Ciara Lee reports.

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The most carefully planned rate hike in history? The Fed's move was factored in by markets long before the announcement. But over the longer term there may be some clear winners and losers. IHS Global Insight's Jan Randolph. (SOUNDBITE) (English) DIRECTOR OF SOVEREIGN RISK AT IHS GLOBAL INSIGHT, JAN RANDOLPH, SAYING: "If the Fed has read the US economy correctly and it is more or less restored back to health, that is good news for everyone. To what extent the US economy can be a locomotive, even for emerging markets as we saw 12 years ago is another question." In Japan, the weakening of the yen against the dollar spurred automakers and technology stocks, exports seen as likely to get a boost. But some have warned about impact on emerging markets - many of which borrowed money in dollars while rates were low. The most vulnerable - Brazil. It's in a deep economic crisis and its currency has lost a third of its value against the dollar this year. BGC's Mike Ingram. (SOUNDBITE) (English) MARKET STRATEGIST AT BGC, MIKE INGRAM, SAYING: "It was interesting to see Janet Yellen give a very upbeat assessment of the US economy just half an hour before Fitch downgraded Brazil's sovereign to junk." Also at risk,Turkey. It saw big inward investment after the US cut rates to near zero, and is also a big importer of goods, so things look set to get a lot pricier. China too is expecting an impact on trade. (SOUNDBITE) (English) MARKET STRATEGIST AT BGC, MIKE INGRAM, SAYING: "It does put some further pressure on China to further ease its currency because it is still largely pegged to towards the dollar and that seems to be something that the PBOC have been happy to do for some time." Russia and Nigeria could also come under pressure. Their economies heavily reliant on exports of commodities - whose prices could drop even further as the dollar strengthens.

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US rate hike: the global impact

Thursday, December 17, 2015 - 01:46