Emerging nations stem capital flows

Emerging markets from Brazil to India took steps this week to stem an outflow of capital as concern mounted that developed nations are approaching an end to an era of pumping unprecedented liquidity into their economies.

India's central bank sold US dollars over the past two days to stem the rupee's slide, two people familiar with the matter said, while Indonesia unexpectedly raised its benchmark interest rate yesterday.

At the same time, Brazil said it would unwind some of the capital controls put in place in 2010, when the United States Federal Reserve was embarking on its second round of quantitative easing, while Thailand said it sold dollars to aid the baht.

The moves come after the Bank of Japan's decision this week to refrain from adding stimulus even after a slide in share prices that risks hurting its campaign to revive growth.

The MSCI Emerging Market Index of shares has fallen more than 10 per cent since the chairman of the US Federal Reserve, Ben Bernanke, said on May 22 that the Fed could scale back asset buying if it was confident of sustained economic improvement.

Tim Condon, the head of Asia research at ING in Singapore, said: "Markets are repricing for what we would see in a normalisation of United States treasury yields."