Recently, the already fragile global economy has been exposed to more and more problems under the impact of the epidemic. As the epidemic continues to intensify in Europe and the United States, people’s attention is mainly focused on the West, so that many people have ignored the warnings issued by the currencies of five Asian countries including Indonesia and Thailand.
Alarm sounds: 5 Asian countries The currency lights up again
Recently, the Federal Reserve cut interest rates, restarted quantitative easing (QE), and even finally announced “unlimited money printing.” This series of “unlimited” operations has caused global concern. s concern. The most important reason for the recent frequent releases of water by the Federal Reserve is that the panic caused by the epidemic has caused a liquidity crisis in the country’s financial market.
One of the most significant impacts of the US dollar liquidity crisis is the frequent appreciation of the US dollar. Judging from the market chart, on March 19 this year, the U.S. dollar index once reached 102.84, the highest level since January 2017. However, 10 days ago, the U.S. dollar index closed at only 95.04, which means that the U.S. dollar index closed at 95.04 in just 10 days. The increase has exceeded 8%.
Don’t forget, on March 16, the Federal Reserve also announced an interest rate cut to 0 interest rates and announced the restart of a US$700 billion QE, however, the U.S. dollar index did not fall as a result. Of course, this cannot be entirely blamed on the epidemic. Saudi Arabia’s sudden announcement of an “oil price war” was also an important reason for the sharp rise in the U.S. dollar index. However, the tightening of US dollar liquidity is an indisputable fact.
As the U.S. dollar index rises frequently, some emerging market currencies have begun to sound alarms. Among them, the exchange rates of five Asian countries, including India, Indonesia, Thailand, Malaysia and the Philippines, are even more confusing. ignore. Data show that the Indian rupee has fallen by 6.7% against the US dollar so far this year, and the decline in the last month has reached 5.9%. The Nikkei Asian Review stated that the Indian rupee has fallen to a record low.
In addition, the Indonesian rupiah has also fallen to its lowest level since the Asian financial crisis in 1998. It has fallen by more than 16% so far this year, and has dropped by a cliff of 15.95% in the past month; the Thai baht this year It has fallen by more than 8% so far, and has fallen by 3.34% in the past month; the Malaysian ringgit has fallen by nearly 7% so far this year, and has fallen by 3.56% in the past month. In contrast, although the Philippines has only declined 0.76% so far this year, the country’s exchange rate has fluctuated very much in the past month, which is not a good sign.
Recently, when a European bank conducted a stress test on the currency exposures of these five countries, it was found that these countries The alarm has been sounded. A trader in the bank’s trading department in Singapore even said that when the epidemic cannot be controlled in the short term and the economy continues to be sluggish, these currencies that experienced significant turmoil during the Asian financial crisis more than 20 years ago have been labeled as “fragile currencies.” “.
Foreign exchange reserves shrink and emerging market currencies may suffer a new round of sell-off
Emerging market currencies that have been hit hard by the new coronavirus may face a new round of selling as foreign exchange reserve data may shrink significantly.
Mexico’s weekly foreign exchange reserves data will be released on Tuesday, along with those for Indonesia, Taiwan, the Philippines, China, Malaysia, South Africa and Russia. This comes after data showed South Korea’s foreign exchange reserves fell by $9 billion last month and India’s foreign exchange reserves fell by $6 billion since the end of February.
The coronavirus pandemic has prompted a rush to the dollar as a safe haven, forcing central banks in emerging economies to dip into foreign exchange reserves to stem currency declines. However, shrinking foreign exchange reserves have also put them in a dilemma. On the one hand, they must maintain exchange rate stability during capital outflows, while ensuring that they have ammunition for future needs.
“I expect emerging market currencies to face more weakness as demand for the dollar will remain strong,” said Khoon Goh, head of Asia research at ANZ Bank in Singapore. “As central banks continue to smooth FX movements and provide liquidity to markets, we can expect reserves to decline further.”
Significant depreciation will cause a series of syndromes. On the one hand, these countries have launched strong foreign exchange controls to varying degrees and strictly controlled the outflow of US dollars, which in turn caused difficulties for local buyers to purchase foreign exchange and make payments.
On the other hand, currency depreciation has caused a sharp increase in costs for local buyers, who may choose to suspend trade or even stop paying the balance.
Therefore, all foreign traders, please be careful. Although order resources are relatively scarce now, you cannot blindly accept orders, and don’t step on the wrong side! </p
