Like the market, the past few weeks for me have been hectic and busy. There were many moments of ups and downs. Anyway, like I have said in my last posting a few weeks back, we are close but not yet there (Greed index is around 29+ now and Fear index is about 36+). Patience is important. So much for the market.
A few months ago, I was talking about inflation if there were revaluation of China Yuan. Despite all the 'noises', the revaluation did not materialize. Unfortunately, this does not mean that inflation will go away. If you read the news these few days, you will realise that the people in China are asking for higher and higher wages. Of course, this is necessary because they are finding houses more expensive and other necessities less affordable. Everybody works for a living. If you feel that the dollar you receive today is worth less than a dollar tomorrow, you will ask for more pay. There is nothing wrong with this and it is part and parcel of wage inflation. However, if this is left uncontrolled, it will be disastrous. Being the 'factory of the world', this inflationay effect in China will soon be exported to the rest of the world.
And, if you think our exchange rate policy may be able to cushion us from the inflationary effects, think again. Our exchange rate is now around 1.41 after spiking up to 1.36 a couple of months back after the shift in the exchange rate band. Being a country that imports most of our domestic products, this could only mean that we will be seeing more inflationary effects soon.
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