Valeria, who runs a stall in Johannesburg's bustling Randburg area, naturally rejoiced at the rand's misfortune last week as it increased the value of her illicit stash of dollars.The problem is that overnight the Chinese wholesaler joined fellow sellers of imported goods in jacking up his prices in rand, reacting to the plunging local currency."I'm back to square one," Valeria, who did not want to give her surname, told Reuters. "In fact, I'm worse off because trading forex is only a small part of what I do. The clothes are my main source of income."Valeria is not alone. In emerging markets as diverse as Brazil, Poland and Indonesia, millions of people and businesses from street hawkers to luxury retailers face turbulent times.
This is all because far away in Washington, the Federal Reserve is starting to think about scaling back its "quantitative easing" programme for boosting the US economy.The scheme, an $85 billion-a-month bond-buying programme, has pushed US interest rates close to zero, encouraging investors to divert trillions of dollars into high-yielding debt denominated in currencies such as the rand.Even before the US central bank unwinds the programme, huge sums are flooding back into dollars as investors anticipate higher US rates and flee the emerging market currencies that they themselves helped to push up, and are now undermining.
