Peru’s definitely not Cyprus

Last Tuesday in Rick Moran’s podcast I mentioned that the flight of capital from the EU might make emerging markets very attractive.

Well, look at Peru:
Peru intensifies currency fight (emphasis added)

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://blogs.ft.com/beyond-brics/2013/03/27/peru-intensifies-currency-fight/#ixzz2OsEFVTIh

For the eighth time in 10 months, Peru’s central bank has raised deposit requirements on dollar-denominated accounts to stem the flow of hot money into its fast-growing economy and dampen currency appreciation.
With the sol approaching a 16-year high, Peru’s central bank said that as of April 1, the reserve ratio will rise 0.25 percentage points. The bank, which has ruled out Brazilian-style capital controls, has also been aggressively buying dollars in the spot market to slow the trajectory of the sol.

So far, its strategy has worked, with the sol weakening 1.33 per cent against the dollar this year, after appreciating 5.7 per cent in 2012.

The Peruvian bank’s struggle to rein in its currency is shared by fast-growing neighbour Colombia, which last week said it was willing to double its spending on dollars, to $10bn, this year to take some of the steam out of the peso.

Both countries are enjoying the fruits of years of prudent economic management – but rapid economic growth and low inflation have come hand-in-hand with the kind of current appreciation that makes exporters squeal.

Hmmm. . . Prudent economic management.

Are you listening, Paul Krugman?