How inflation caused a truce in the currency wars

[CHIMO]

The insurgents behind the currency war are in retreat, sent on the run by a surge of inflation.

Some of the same emerging markets that fought the gains in their currencies only a few months ago through intervention and capital controls are now allowing higher interest rates.

Russia’s central bank on Tuesday widened the range in which it allows the rouble to float. “We think this measure … will ensure more effective transmission of interest rate policy and … better control price stability,” Alexi Ulyukayev told a briefing in Moscow, according to Reuters.

This shift suggests emerging markets are listening to the advice they have been getting from the International Monetary Fund, which has expressed worry in recent months that inflation pressure and asset-price bubbles in developing countries. The IMF tacitly endorsed capital controls, but warned rising prices would ultimately have to be kept in check by higher interest rates and stronger currencies.

http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/how-inflation-caused-a-truce-in-the-currency-wars/article1925192/

[Demeter]

1. Bah!

The currency speculators smell bigger profits in commodities now. And then, there's always the promise of a shooting war in the Middle East....lots of profits to skim in a war.

Besides, they get bored doing the same old, same old. And the natives are getting restless...