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Is the EM currency sell-off nearing its end?
by Sarah Miloudi on Aug 22, 2013 at 10:37
She explained: 'We believe these more muted proposals have [an] upside, in that they are more likely to pass through Congress.'
India has also been in the headlines following the decision to raise the import tax on gold, silver and platinum from 8% to 10%, allowing government-owned institutions to issue quasi-sovereign bonds and restricting capital outflows.
But the impact of these moves is less clear cut than measures to reform Mexico's resources industry for the first time in 75 years.
Yates said she remains cautious, and believes investors should not use the sell-off to build up a position.
She explained: 'While the first two measures were broadly welcomed by the market, doubts remain over whether they would be sufficient to stabilise the currency.
'The third measure, however, had a more mixed reception. Some analysts thought it was another creative way to support the currency without resorting to spending reserves. Others worried it was a precursor to capital controls.
Yates added: 'In our opinion, the Indian authorities are in a difficult position. First they need to stabilise the currency. Tightening liquidity, limiting imports and restricting outflows can help achieve this. Unfortunately, such measures may also impinge on India’s growth potential and ultimately, investor sentiment.'
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