High rates draw in­vestors

The Star Late Edition - - BUSINESS REPORT -

Global trade is on track to ex­pand 2.4 per­cent this year af­ter grow­ing at the slow­est pace since the fi­nan­cial cri­sis, just 1.3 per­cent, in 2016, ac­cord­ing to the World Trade Or­gan­i­sa­tion.

WTO di­rec­tor-gen­eral Roberto Azevedo said last week there was “deep un­cer­tainty” about eco­nomic and pol­icy de­vel­op­ments, par­tic­u­larly in the US, and clar­ity was needed on US Pres­i­dent Don­ald Trump’s “Amer­ica First” trade poli­cies.

Sim­i­lar con­cerns were voiced by an over­whelm­ing ma­jor­ity of econ­o­mists who an­swered an ad­di­tional ques­tion in the poll, sug­gest­ing broad agree­ment among econ­o­mists on the need to re­sist pro­tec­tion­ism.

While US Com­merce Sec­re­tary Wil­bur Ross said such warn­ings were “rub­bish,” be­cause the US was less pro­tec­tion­ist than its trad­ing part­ners, Trump has made re­duc­ing trade deficits a key fo­cus of his eco­nomic agenda. FOR­EIGN in­vestors lured by in­ter­est rates among the high­est in emerg­ing mar­kets poured 159 bil­lion rubles (R37.1 mil­lion) into Rus­sia’s lo­cal-cur­rency debt in March, the most on record. Most of the in­flow came in the sec­ond half of the month af­ter the US Fed­eral Re­serve laid out an un­ex­pect­edly dovish rate-hike outlook, Rus­sia’s cen­tral bank said in a re­port on Wed­nes­day. The strong de­mand means there’s lit­tle risk of sub­stan­tial ru­ble weak­en­ing, even af­ter the cur­rency’s 8.7 per­cent surge this year, it said. The Fed’s tone reignited the so-called carry trade for in­vestors, who bor­row where in­ter­est rates are low to in­vest in high-yield­ing cur­ren­cies. De­mand for the bonds, also known as OFZs, hasn’t abated and the fi­nance min­istry sold all 39.5 bil­lion rubles of 2019 and 2033 notes ten­dered. – Bloomberg US

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