CME-FX Markets in a Zero Rate World
 
Date: Tuesday, 29 January 2013
Time: 11:00am - 12:00pm CT
Location: Online
Speaker: Blu Putnam, Managing Director and Chief Economist of CME Group
Sponsoring Firm: CME Group

The context of near-zero short-term interest rates from the United States, Europe, the United Kingdom, and Japan provides a huge complication for emerging market countries in terms of the potential interplay of exchange rate movements with growth prospects and inflation pressures. There is nothing like zero interest rate policies (ZIRP) from the major currencies to provide incentives for market participants to seek higher yields elsewhere, including emerging market currencies. The essential policy challenge for emerging market central banks is how to encourage economic growth in these difficult times without fueling inflation on the one hand or creating an environment that would lead to too much currency appreciation that could weaken growth prospects on the other hand.

Join Blu Putnam, CME Group's Chief Economist, as he first briefly discusses the context of ZIRP, namely why near-zero rates in the mature industrial world are encouraging global markets participants to react to the on/off process of political decision making. Second, he presents his perspectives on the transfer of volatility to emerging market currencies, which he calls the "Volatility Box Conundrum." The Volatility Box approach allows us to frame the issues facing emerging market central banks as they decide on various policy courses which will impact their exchange rates. Next, Blu applies his analysis to examine some key emerging market countries to see where they fit into the Volatility Box Conundrum. Lastly, Blu discusses India and China as they move toward greater currency normalization; Brazil and Mexico as they struggle to encourage economic growth; and Russia as it manages its oil revenue risk.

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