India has become the latest country to join in the bashing of Renminbi undervaluation saying it leads to a massive advantage for Chinese exporters.A research paper from India’s Central Bank says that its artificially boosts China giving it a competitive advantage over Indian exports.Note Brazil another one of the famed BRIC quartet has too been complaining about Chinese imports swamping its industry.Note Brazil has seen massive currency appreciation in recent years due to a combination of high interest rates and strong economic fundamentals.

The Reserve Bank of India has clarified that Indian individuals cannot trade in the forex markets under FEMA rules.Note a number of Indian brokers and forex companies were advertising heavily promising big returns to retail investors.Note forex markets are extremely tough to trade even for professional traders for institutions.For retail investors they are a sure shot way to lose money in large amounts.Note forex markets offer much higher leverage than normal Futures Equity markets.Being an effectively zero sum game and requiring high amounts of knowledge ,forex markets are just too sophisticated for retail investors in my view.But they are quite lucrative for forex trading portals and companies whose main target semgent are retail investors.

The Dollar is being relentlessly attacked by Bears due to massive QE program unleashed by the US Fed.However the US Dollar continues to be a safe refuge in many parts of the world.For countries affected by major politicial and economic problems,dollar is looked upon a safe haven for capital preservation.Many of these places have a history of high inflation and major political upheavals.In these places,Gold and Dollar are looked upon as equals for preserving wealth during times of chaos.Vietnam serves as a reminder where even citizens of relatively fast growing stable economies look upon as Dollar as a rock of stability.The South East Asian country has seen high inflation in recent times and numerous devaluations of its currency.The Communist led country has tried to replicate China in many of its policies some of which have backfired.The recent scandal and debt default of a major government owned company has shaken the confidence of investors.With high inflation and depleting foreign reserves

Deflating Developed Countries are fueling Inflation in Developing Ones with ultra low interest rates.QE2 has been heavily criticized around the world due to the dangers of it creating asset bubbles in emerging markets as yield hungry investors look for growth at any price.With hundred of billions flooding emerging debt and equity markets,the situation has become volatile for a lot of countries.Brazil has already seen its currency skyrocket in the last 2-3 years due to the huge spread between its bond yields and the US interest rates.With carry investors able to make around 10%,Brazil remains a favorite market for the inflow of dollars.Other countries like Thailand,Malaysia,Indonesia have seen their stock markets rallying to all time highs as well.Many of these countries have already imposed capital controls earlier.Now they are increasing further,as monetary authorities rush to close the gates.

Brazil,Peru,Colombia and now South Korea have all joined the “Buy Dollar and Sell Local Currency” Club.The Brazilian Real has appreciated by 34% in the last 2 years while similar stories lie behind Peru and Colombian interventions as well.With yields at near zero,Developed World Investors are pouring money into debt,equity and commodities fueling some of the Emerging Markets to all time highs.Some of the valuations like the Indian market are already stretched with local investors shunning the bubble markets.Countries with large Export Sectors like South Korea are particularly sensitive to currency appreciation and are joining in the chaos that the currency markets have become.The $4 Trillion Currency Markets are too big for a single country to take on as the Swiss found out losing Billions of Dollars in the process.The Currency Chaos is set to persist as the Financial System has become Unstable with Huge Debts,Moral Hazard and Central Bank Meddling.Gold has touched an all time high of $1300 with Silver following closely.With such volatility in Currencies,Business has become quite difficult with faith in currencies eroding at a fast pace.

In our Financial linked world where Capital is Globalized while Regulation is not,Hot Money Flows are fueling inflation and asset based bubbles in Developing Countries.Some of the Emerging Markets are either close to or have surpassed the 2008 all time highs.Inflation is also hitting dangerous levels in some countries like Argentina,India and others.The depreciating dollar brought upon the the US Federal Reserve Printing of money has made it necessary that the Central Banks purchase Dollars.This has been done not only by Brazil and Singapore but also by Japan.With more Dollar Printing,these Purchases will increase the Liquidity in the Developing Countries.This is a sure shot recipe for high inflation which will be difficult to control.India has already raised Interest Rates 5 times this year in order to rein in the pernicious effects of high inflation on its largely poor population.