Published on September 7, 2013

The strengthening US dollar has put emerging economies of India, Turkey, Indonesia, Malaysia and Thailand in a fix. Since US Fed’s decision to discontinue quantitative easing known as QE3, currencies of the above mentioned countries have been declining and have fell to record lows. Like various other industries, the polymer market has also been severely hit by the rising dollar.

With the Indian rupee falling below all technical targets, depreciating by 20% since May, redeeming Indian economy has very little going in its favour. A local manufacturer efforts to hike prices will not lead to any positive result, as the current market situtation and uncertainty has left producers with no option but to keep their offers steady. A price hike would not be accepted by buyers either and thus trade has slowed down.

Just like the Indian rupee, the Turkish lira also hit record lows on the back of strengthening dollar. The Turkish currency has lost nearly 13% since the beginning of this year. This rapid decline in the value of lira has affected every industry. For instance, polymer traders who conduct business in local markets are struggling to sustain profits as raw materials are bought in dollars and sold in lira. Furthermore the demand for this commodity has also lessened. Stagnant demand, the strengthening dollar and sluggish economy has cut down the demand for new imports. Traders are left in the lurch and a dismal economy has been giving them no hope whatsoever.

As far as the sellers are concerned rise in energy and raw material prices has buyers demanding a reduction in prices. however sellers are in no mood to give in to the buyers' demands for discounts. the market is also set to move higher with crude oil prices rising and the hike in value of naphtha and monomers.

The Southeast Asia's largest economy is also experiencing a major setback with soaring dollar prices. With the Indonesian rupiah losing ground by nearly 18% has forced the government to introduce reforms and measures to instill confidence in the free-falling Indonesian currency. However traders expressed doubts over the government measures and did not expect to see any positive changes in the market. Trade is sluggish with buyers adopting a wait and watch attitude. Distributors have to bear the brunt of rising costs of feedstock prices. They have to buy raw materials in dollars and sell their goods in rupiah, and this has a major impact on their profit margins.

Malaysia has also been affected by market uncertainty and economic slowdown. The Malaysian ringgit has also hit fresh lows and has lost as much as 0.8% to 3.3200% per dollar. The market seems devoid of any buying interest. A decline in demand has made it difficult for producers to adjust prices on the back of rising raw material costs. Depreciating Malaysian currency has buyers over the edge and they prefer to remain on the sidelines.

Thus uncertainty and instability hovers over the emerging economies. Is a bleak future awaiting these developing nations or will they rise from this difficult situation like a phoenix from the ashes.