General

Since the Federal Reserve raised interest rates and the Bank for International Settlements released statistics, from January to June 2022, central banks around the world have raised policy interest rates 80 times, a record high, among which emerging countries accounted for more than 60 times.

To a certain extent, the interest rate hike reflects the flow of foreign exchange in various countries and reflects the inflation level of the country, which also has an important impact on the appreciation or depreciation of the national currency.

Japanese yen hits 24-year low

Recently, the exchange rate of the yen has depreciated sharply, and the yen has hit a 24-year low against the dollar. The Japanese foreign exchange market and bond market are weak, and the market generally expects that 140 is a certainty. Experts have previously warned that the Bank of Japan's reckless quantitative easing policy has approached market limits.

Japan is the third largest economy in the world. If the yen continues to depreciate and Japanese government bonds continue to fall, there will be a risk of defaulting on government bonds.

In this regard, the Japanese Ministry of Finance, the Financial Services Agency and the Bank of Japan issued a statement saying that they are concerned about the current depreciation trend of the yen, emphasizing that they will continue to pay attention to foreign exchange market trends and the impact on the Japanese economy.

Deutsche Bank also issued the latest warning that this disastrous Modern Monetary Theory (MMT) experiment may expose Japanese financial markets to the risk of a systemic collapse.

Deutsche Bank strategist George Saravelos said, "This is a 'really extreme' level of money printing given that every other central bank in the world is tightening. It's one of the reasons we've been bearish on the yen. As many have As argued, given that the source of the yen's weakness is the Bank of Japan itself, the central bank's currency intervention is simply not credible in this environment."

The sharp depreciation of the yen has also made local prices cheaper than other countries. Many foreigners in Japan are frantically "scavenging goods", and electronic products such as iPhones have been looted.

The depreciation of the Korean won gradually widens

In addition to the depreciation of the yen, the exchange rate of the Korean won has also continued to decline, and the depreciation rate has gradually expanded. Especially recently, the exchange rate of the Korean won against the US dollar fell below 1,300 for the first time in the past 13 years, with a cumulative depreciation rate of 9.43%, which is second only to the Japanese yen in developed countries in Asia. , the exchange rate hit a 13-year low.

In this regard, Bank of Korea Governor Lee Chang-yong said that in 2022, South Korea's price increase is likely to exceed the 4.5% expected in May. In this case, South Korea's fiscal and monetary policy needs to focus on stabilizing prices. Therefore, South Korea may increase interest rate hikes in July to further stabilize prices.

In May data released by the Korea Consumer Agency, the average price of a bowl of cold noodles in Seoul increased to 10,269 won, and the unit prices of bibimbap, knife-cut noodles, and kimchi soup rose to 9,536 won, 8,269 won, and 7,308 won, respectively, up from the beginning of the year. Around 200 won to 500 won.

With the intensified increase in the import price of raw materials, the burden of raw material costs for domestic manufacturers in South Korea will further increase. The South Korean media even said that "South Korean companies are in a state of emergency".

South Korea's financial authorities said that as worries about the stagnation of the South Korean economy have increased, and market uncertainty has also increased, the depreciation of the won will bring high prices and rising benchmark interest rates, which will further reduce corporate activity, so market investors are more likely to have The "safety asset" US dollar.

Sterling falls, central bank may raise interest rates aggressively

In addition, the exchange rate of the pound against the dollar continued to depreciate, once falling to 1.2605, the lowest level since 2020.

Bank of England monetary policy member Catherine Mann said the central bank needs to raise interest rates more aggressively to stop the pound's decline against the dollar, which would further push up inflation.

And that, coupled with "robust employment, widespread bonuses and wage growth, firm house prices," and savings accumulated during the pandemic, she believes domestic inflation may be stronger than previously thought.

The Bank of England voted for a rate hike in sterling at a policy meeting a day after the Fed announced a rate hike.

It is reported that so far this year, the pound has fallen by about 10% against the dollar. Mann said that if the Fed raises rates at the current pace, and the European Central Bank does, the BoE should move faster or risk a sharp drop in the value of the pound, which would boost inflation.

Egypt's exchange rate hits a new low, foreign reserves plummet

Egypt's inflation rate rose to 15.3% in May, compared with 14.9% in April, the Central Bureau of Statistics of Egypt announced recently. In May 2022, the national consumer price index reached 130.2 points, an increase of 0.9% from April. The Central Bank of Egypt announced that it will keep the benchmark interest rate at 11.25%.

Egypt's currency, the Egyptian pound, fell to its lowest level in five years against the dollar at one point, according to Refinitiv statistics.

It is reported that the epidemic of the new crown epidemic has led to a decrease in the number of tourists to Egypt, and foreign investors have withdrawn billions of dollars from the Egyptian bond market. The crisis in Ukraine led to higher prices for imported goods and a shortage of foreign exchange in Egypt.

For months, pressure on the Egyptian pound has prompted the central bank to allow the Egyptian pound to be exchanged for foreign currencies flexibly according to the market. The Central Bank of Egypt announced that as of the end of May, Egypt's foreign exchange reserves had fallen to $35.5 billion from $37.123 billion in April.

The exchange rate plummeted and foreign exchange was in short supply, causing Egypt to fall into a food crisis. Because of the escalation in Ukraine, the cost of imported wheat in Egypt has risen sharply.

In response to the food crisis, on the 26th, Egypt's Minister of Supply and Internal Trade said that Egypt has signed a contract with India to purchase 180,000 tons of wheat, and shipments will begin once the goods arrive at Indian ports.

In addition to the above-mentioned countries, on the 27th news, the US dollar fell against the Turkish lira USD/TRY in a short-term, falling more than 3.5% in the day to 16.30.

The Philippine peso fell to its lowest level in more than 16 years against the dollar. USD/Philippine peso rose as much as 0.4% to 54.49, the highest since November 2005. And the central bank's preference for gradual rather than aggressive rate hikes has weighed on its currency.

The Iranian currency, the rial, also continued to depreciate, hitting a record low against the U.S. dollar. Iran's open market exchange rate, the rial, fell to 332,000 rials to the dollar at one point.

Recently, the Bank of Thailand also issued a statement saying that the baht depreciated quite rapidly. On June 27, the China Foreign Exchange Trading Center authorized the announcement of the market exchange rate of RMB against the Thai baht: 100 yuan and 530.25 baht.

In addition, there is one country that is particularly interesting, and that is Sri Lanka. The Prime Minister of the country stated that the former Sri Lanka had high inflation, material scarcity, high debt, massive capital outflow, crazy exchange rate depreciation, and the economy was on the verge of collapse.

The country's rupee has plummeted since March, falling 80 percent against the dollar, making it the world's worst-performing currency.