South African rand gets walloped in EM blood-letting.

 Emerging-market currencies are taking a battering, with the South African rand (EZA) receiving particular punishment. What began as a "drip drip of currency weakness" (WSJ) on concerns about the end of the Fed's QE program has turned into a flood as countries' various problems have become exposed. The rand is down 6.2% since last week and the Turkish lira is -2.25%.

Indian growth declines to weakest in a decade.

The expansion in Indian GDP declined to its slowest in a decade in FY 2012 (ending in March 2013), coming in at 5%, while the growth in FQ4 was even lower at 4.8%. Still that did meet consensus and was above the 4.7% in FQ3. The services sector grew strongly in FQ4, while manufacturing and farming also expanded, although mining declined an annual 3.1%. India's Sensex dropped 2.3% while the Indian rupee was -0.3% vs the dollar at the time of writing.

Japan remains mired in deflation.

 Japan's core CPI dropped for the sixth consecutive month in April as prices fell 0.4%, indicating how far the Bank of Japan has to go in achieving inflation of 2%. More positively, Japanese industrial output rose 1.7% on month vs +0.9% in March and consensus of +0.6%. While the increase indicates that companies have boosted output in response to a pick-up in exports, manufacturers expect production to be flat this month and to fall 1.4% in June.

Japanese stocks break nine-month winning streak.

The Nikkei 225 (EWJ) closed +1.4% today after several volatile sessions, but that wasn't enough to prevent the index from ending May 0.6% lower, its first monthly loss in ten. Stocks rallied following a report yesterday that Japan's $1T Pension Investment Fund could increase its equity allocation

Eurozone unemployment hits record - again.

As expected, eurozone unemployment edged up to a new high of 12.2% in April from 12.1% March, with an eye-watering 19.4M people without a job. Meanwhile, inflation rose in line with consensus to an annual 1.4% in May from 1.2% in April, while core CPI increased to a greater-than-expected 1.2% from 1%. Inflation is well below the ECB's target of just under 2%, so could give the bank further room to loosen monetary policy.

We have already seen three successive rate cuts by the Reserve Bank of India. However, if one tries to read the signals sent by Mr. Subbarao, those who are hoping for a further rate cut this June are likely to be disappointed. This may seem an anti growth instance, but we believe he has a point. While inflation is off its peak, it has not sobered yet. With a highly uncertain environment, one can hardly bet on global commodity prices and their impact on inflation. The GDP growth rate has hit a decade low and domestic currency is under pressure. To make matters worse, India's current trade deficit remains high. With elections around the corner, we believe there is a limited room for fiscal reforms. Hence, we will not be surprised with an absence of rate cut, at least in the next review due this June.

Rupee may touch 60/$ by year end; CAD worrisome:

The rupee is expected to trade in 55.50 against the dollar for short-term and there may be retracement in the rupee in the near-term. However, the long-term challenges for the rupee remain, says Brijen Puri, head- markets, JP Morgan. 

He expects the rupee to touch new lows in 6-to-9 months and does not rule out the rupee touching 60 against the dollar by the year-end.
"The current account deficit (CAD) continues to remain a major concern and the RBI will step in aggressively to stem the fall in the rupee,"