Aurelia Butler

LONDON (Reuters) – The pace of interest rate hikes by major developed and emerging market central banks continued at a healthy clip in March though the scale of rises tapered off somewhat as turmoil in the banking sector clouded the outlook for global growth. March saw six interest rate hikes across eight meetings by central banks overseeing the 10 most heavily traded currencies. Policy makers in Australia, Switzerland, Norway and Britain joined the U.S. Federal Reserve and the European Central Bank in lifting key lending rates by a total of 200 basis points (bps). Policy makers in Japan and Canada kept benchmarks unchanged. This follows six interest rate hikes delivering 250 bps of uplift across six meetings by G10 central banks in February. Developed markets interest rates, https://www.reuters.com/graphics/GLOBAL-MARKETS/gdpzqkljbvw/G102303.gif March was a roller coaster for markets and policy makers, with rising expectations that the U.S. Federal Reserve’s rate could peak at 6%, before a collapse of a number of U.S. banks and the Credit Suisse crunch rocked global markets, raised concerns over financial stability and clouded growth prospects.”The Fed and other central banks made clear banking troubles would not stop them from further tightening,” Wei Li, global chief investment strategist at the BlackRock (NYSE:BLK) Investment Institute, wrote in a note to clients. “By clearly separating financial and price stability goals and tools, major central banks carried on with rate hikes through the tumult.”However, the world’s top central banks are openly contemplating an early end to their rate hikes, not least because of the recent financial turmoil.On the flipside, oil prices surging on Monday on the back of a surprise OPEC production cut could add to fresh inflation pressures, analysts said. [O/R]In emerging markets, a slowdown in the rate hike push was more evident. Fourteen out of 18 central banks in the Reuters sample of developing economies met to decide on rate moves, but only five hiked by a total of 150 bps – Mexico, Thailand, the Philippines, Colombia as well as South Africa, which delivered a bigger than expected 50-bps rate hike. The other nine left rates unchanged. This compares with February, when 13 emerging central banks met and only four hiked by a total of 175 bps. “We are almost at the end of the hiking cycle,” Alessia Berardi, senior economist at the Amundi Institute, said. Emerging markets interest rates, https://www.reuters.com/graphics/GLOBAL-MARKETS/znvnblaqjvl/EM182303.gif More

MUMBAI/NEW DELHI (Reuters) – A surge in India’s services exports, which hit a record high in the October-December quarter, is expected to shield the economy from external risks as a slowing global economy will likely weigh on the country’s merchandise exports.Service exports are no longer being driven by IT services alone but also by more lucrative offerings such as consulting and research and development, analysts and economists told Reuters.India’s services exports rose 24.5% on year in October-December 2022, hitting a record $83.4 billion during the quarter, data released by the Reserve Bank of India (RBI) on Friday showed.The services surplus, which deducts any imports in the category, also rose 39.21% to a record $38.7 billion.This, together with a drop in merchandise trade deficit, resulted in the current account deficit shrinking more than expected to $18.2 billion, or 2.2% of GDP.”We expect services exports to grow to over $375 billion by March 2024, as compared to $320-350 billion for the year ending March 2023,” said Sunil Talati, chairman of the Services Export Promotion Council.Services exports will likely surpass goods exports by March 2025, he said.October-December merchandise exports stood at $105.6 billion, according to latest RBI data. GRAPHIC – India’s shrinking current account balance India’s shrinking current account balance IT services still accounted for 45% of India’s total services exports in April-December.Professional and management consulting grew the fastest – at a 29% compounded annual growth rate over the last three years, as per estimates by economists at HSBC Securities and Capital Markets.The recent growth in services exports has been largely powered by global capability centres, which have started to offer global clients a range of high-end and critical solutions such as accounting and legal support.As a result, such exports will hold up better compared to goods exports in the face of a weakening global economy, analysts said.Over the last two to three years, there has been a rapid growth in global capability centres, said Sangeeta Gupta, chief strategy officer at software industry lobby group Nasscom.Nasscom estimates that India is home to over 45% of such global capability centres in the world.According to Pranjul Bhandari, chief India economist at HSBC Securities and Capital Markets, such centres started off providing support functions, but they have now moved up the ladder to tech enablement, business operations, capability development, and even R&D and business development. GRAPHIC – Computer services leading the way Computer services leading the wayhttps://www.reuters.com/graphics/INDIA-ECONOMY/EXPORTS/klpygqaldpg/chart.png While U.S. companies were the first movers in India, a lot of companies from Europe, Australia and Asia are also exploring stepping up their operations, Nasscom’s Gupta said.An acceleration in digitalisation after the Covid crisis and a lack of adequate tech talent in some of these countries are key factors, she added.Sectors such as tourism, education, financial services and health also contributed to India’s higher service exports.EXTERNAL SHIELDThe continued rise in services exports is likely to help rein in India’s current account deficit.”We now revise our CAD estimates for 2022-23 and 2023-24 to 2% ($68 billion) and 1.4% of GDP ($53 billion)respectively, from 2.6% and 2% earlier, said Vivek Kumar, an economist at QuantEco Research. GRAPHIC – Scaling a new peakhttps://www.reuters.com/graphics/INDIA-ECONOMY/EXPORTS/gkvlwbnqqpb/chart.png However, sustaining services exports would partly depend on how demand conditions in developed markets hold up, said Gaura Sen Gupta, India economist at IDFC FIRST Bank.”India has a comparative advantage in services exports, particularly in software services. There is room for further growth with India’s share in world commercial services exports currently just at around 4%.” More

ABUJA (Reuters) – Nigeria’s naira dropped to a record low of 465 per dollar on the official market on Monday, Refinitiv data showed, as traders await the outcome of Friday’s central bank foreign exchange auction.The naira, which trades within a range on the official market, has fallen to successive lows due to dollar scarcity, coupled with central bank’s adjustments to manage a backlog demand for foreign exchange. It later recovered to trade at 461 to the dollar.The central bank on Friday held a bi-weekly retail auction for people or businesses who need dollars to settle offshore trade-related obligations. The result of the sale are expected this Friday.The naira weakened to 750 against the dollar on the black market as traders expect unsuccessful bidders at Friday’s auction to channel their demand to informal sources. “In this quarter, the (central bank) may be willing to raise levels at which they want to intervene on the market,” one trader said, referring to the rate hike. Nigeria’s central bank is battling to manage liquidity on the interbank market while at the same time intervene on the foreign exchange market to prop up the currency. It has been adjusting rates to manage demand against its level of foreign reserves.Nigeria’s president-elect Bola Tinubu and his administration – due to be sworn in in May – will be faced with soaring inflation and an unstable currency which has hampered Africa’s biggest economy as it tries to recover from the COVID-19 pandemic. More