On Aug. 1, China’s central bank pledged to continue to tighten the country’s economic policy to keep a lid on inflation. In the past eight months, the central bank has raised interest rates five times while increasing the minimum cash reserves for the nation’s banks nine times.
Despite these efforts, inflation rose to a three-year high in June to 6.4 percent and there is growing unrest as the cost of living continues to surge. This will likely mean another interest rate increase before the end of the year. With growth already weakening in much of the developed world, a sharp slowdown in the world's No. 2 economy would be a huge blow to global growth prospects. Such pessimism is likely to benefit economies such as Australia, Switzerland, and Canada, which are considered the most stable in the current climate. Still, these economies are not immune to global forces, leaving investors with some very difficult decisions.
– Scott Boyd is a currency analyst with OANDA, a Forex trading company with offices in New York,Toronto, Singapore, and Dubai, and contributes to the company’s MarketPulse FX blog.
