Global economic recovery is in progress led by the emerging markets. The out-performance of the emerging markets is likely to remain a key feature in the year ahead as the global economy returns to positive growth. There will still be winners and losers, with financial markets satisfying the best and punishing the worst performers globally.
With the risks posed by inflation in the developing economies at this time, official interest rates are likely to be raised sooner and more aggressively in emerging markets. The Asian economies are on the road to recovery to lead the way with India possibly increasing its cash reserve ratio this month. The prospect of widening interest rate discrepancy should continue to strengthen Asian currencies in the year ahead.