US STOCK PLUNGE NO IMPACT IN FIJI
The US stock plunge on February 6 has no impact in the Fijian market.
In an interview with SunBiz, the Governor of Reserve Bank of Fiji Ariff Ali explains volatility in global financial markets emanating from interest rates, inflation or growth outlooks is quite common.
“Overall, the impact on Fiji is expected to be negligible, if any at all, as the presence of capital controls insulates our economy and financial system from the volatility in global financial markets. “Furthermore, the South Pacific Stock Exchange (SPSE) is relatively closed to foreign investors and therefore a share sell-off accompanied by rapid outflow of capital is highly unlikely.
“In terms of the impact on the Fiji dollar (FJD), there has not been a major shift given that the US dollar (USD) gained against major currencies including all of our trading partner currencies except the Japanese Yen (JPY). “This means that on the FJD/USD exchange rate, the appreciation of the USD and the JPY has been offset by a depreciation of the Australian and New Zealand dollars and the EURO. “Consequently, there would be minimal changes to the Nominal Effective Exchange Rate.” He said the Financial Market plunge is more likely to be a temporary market correction and expected to normalise shortly.
In fact, since the plunge on Tuesday (last week), the Dow has bounced back and improvements have been noted in Asian financial markets. “While uncertainty in the global stock market still remain, the fundamentals of the US and most Asian economies including our trading partners remain robust, thereby implying that recent financial market developments will not impede the current global economic upswing.
“External shocks will always occur at some stage of the business cycle.
“At the broader level, authorities will need to build buffers to cushion it.
“This includes prudent fiscal management, raising foreign reserve holdings, along with reforms in the real and financial sector to enhance our resilience to external vulnerabilities. “Efforts on all these fronts are already progressing on the ground in Fiji.”
Going forward, Mr Ali said the Reserve Bank would continue to monitor financial and economic developments globally and align domestic policy appropriately where relevant.
On February 6, the US stocks suffered their worst falls in more than six years in a sell-off sparked by concerns of higher interest rates.
The Dow Jones Industrial Average index tumbled 1,175 points, or 4.6 per cent to close down at 24,345.75.