Asia, the victim of US Fed's interest rate cut?

Asia, the victim of US Fed's interest rate cut?
Nov 2, 2007 02:21
KATRINA Points: Join Date: Nov 29, 2004 Status: offline	On Oct. 31, the US Fed announced to cut its interest rate again to hlep US economy recover from the housing slump and credit crisis. In the statement, it is said that the interest rate will be reduced to 4.5 percent. It also reduces the discount rate to 5 percent. However, some analysts do not think so. In their view, Asian countries including India and China will become the victim of US Fed's move. Cutting the interest rates will escalate US dollar's depreciation. And dollar has been playing the leading role for a long time and has a great influence over the international financial market. By cutting the interest rate, US could shake off the ripple effect of subprime crisis. But it might escalate the bubble of captial prices in the international market. With the depreciation of US dollars, more and more US investors start to do their investment in those developing countries. The excessive capital overflow is not good for those developing countries. It will bring inflation risks. The Indian central bank said that more overseas capitals have flowed into India since US Fed cut the interest rate on Sep.18. This week, India also raised its reserve ratio at the fourth time. What do you think? Asia will be the victim of US Fed's interest cut? Will US Fed's move trigger the bubble in the international financial market?

Nov 2, 2007 02:21

KATRINA
Points:
Join Date: Nov 29, 2004
Status: offline

On Oct. 31, the US Fed announced to cut its interest rate again to hlep US economy recover from the housing slump and credit crisis. In the statement, it is said that the interest rate will be reduced to 4.5 percent. It also reduces the discount rate to 5 percent.

However, some analysts do not think so. In their view, Asian countries including India and China will become the victim of US Fed's move. Cutting the interest rates will escalate US dollar's depreciation. And dollar has been playing the leading role for a long time and has a great influence over the international financial market. By cutting the interest rate, US could shake off the ripple effect of subprime crisis. But it might escalate the bubble of captial prices in the international market.

With the depreciation of US dollars, more and more US investors start to do their investment in those developing countries. The excessive capital overflow is not good for those developing countries. It will bring inflation risks. The Indian central bank said that more overseas capitals have flowed into India since US Fed cut the interest rate on Sep.18. This week, India also raised its reserve ratio at the fourth time.

What do you think? Asia will be the victim of US Fed's interest cut? Will US Fed's move trigger the bubble in the international financial market?

Nov 13, 2007 03:19	#1
DREAMLIFE Points: Join Date: Sep 5, 2007 Status: Offline	The Prime Minister of Japan warned that yen has been appreciating too fast and it might cause side effects in short term. China's RBM is also appreciating very fast and the exchange rate has broken 7.41. However, EU and US still require China to appreciate RMB. We could not make a quick decision that Asia will be the victim of US Fed's interest cut. However, it did influence Asia.

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