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Asian currencies depreciate!
Since March 2024, in order to boost the economy and accelerate the pace of recovery, the United States has continuously launched a strong dollar policy, harvested Asian currencies, and passed on economic risks to Asian countries.
In mid-April, this "exchange rate war" reached its most intense point, and the value of the dollar in the exchange rate continued to rise, and the "gold content" continued to rise.
The currencies of Asian countries can only succumb to the hegemony of the dollar, and the yen, South Korean won, and Indian rupee continue to depreciate, and some have even reached a critical point.
Under these circumstances, the United States has added another fire, directly filling the monetary pressure of Japan, South Korea, and other countries! On 16 April, US Federal Reserve Chairman Jerome Powell, a leading figure in the world economy, issued a rather strong declaration to the public.
Powell said that the Federal Reserve's monetary policy has alleviated inflation in the United States, domestic employment pressure and wage pressure have been reduced a lot, and the US economy has improved significantly. If there is a need, the current monetary policy will be maintained for a long time!
Powell's speech greatly boosted people's confidence in the US dollar, which has also continued to appreciate in this situation, and the ICE dollar index even reached 106.44, surpassing the peak data of 2023.
As soon as the dollar rose, the currencies of various Asian countries depreciated. The renminbi on the mainland is relatively stable, and its price against the dollar has changed from 7.0979 to 7.1028, which is not a big change, while Japan and South Korea are very uncomfortable.
On April 16, the exchange rate of the US dollar against the Japanese yen rose all the way to 154.60, which was unprecedented, even breaking the record of 1990, and the exchange ratio of the US dollar to the South Korean won also broke the data of 2022, reaching 1 to 1400!
No matter how much Japan and South Korea accept the "leadership" of the United States, they cannot tolerate such a drastic currency devaluation, and both countries have taken measures to reverse the decline.
The Bank of Korea and the Ministry of Finance have issued statements to the outside world, saying that the current situation is very unfavorable to the South Korean economy and that the South Korea is very vigilant against this foreign exchange phenomenon! Japan has also repeatedly issued similar statements expressing its concern over this matter.
Japan and South Korea even sent their finance ministers to visit the United States to hold talks with US Treasury Secretary Janet Yellen to discuss the impact of the dollar's appreciation on the two countries.
Seeing this, Japanese business people can no longer bear it and have come out one after another to call on the Japanese government to intervene in the currency exchange rate.
The great harm of currency depreciation
The Japan Chamber of Commerce and Industry, former central bank officials, and the chairman of the Economic Association have all come forward to say that with the depreciation of the yen, the cost of imported raw materials for Japanese companies is rising, and the Bank of Japan and financial authorities should intervene in the current exchange rate.
The main reason why Japan and South Korea reacted so much to this incident is that the consequences of currency depreciation are too serious, and it is difficult for any country to afford a large currency depreciation!
For Japan, a sudden depreciation of the currency would lead to a significant increase in the cost of doing business for Japanese companies. If depreciation is a short-term phenomenon, companies can still grit their teeth to support, but if there is no end in sight, Japanese companies' confidence in the country will decline, and they will even leave other countries!
From 2022 to the present, the yen has generally been in a state of depreciation, and many small businesses have closed down because of this incident, and the impact of rising costs on them is too great.
In addition, the depreciation of the Japanese currency will greatly increase the cost of importing goods from overseas, and the price of goods produced by companies will also increase due to cost problems.
These price increases will eventually fall on the common people of Japan. In February 2024, the cost of living for Japanese households is already at a high level, and the overall spending power is declining. Therefore, people in the Japanese business community have spoken out one after another and are concerned about the exchange rate.
However, in order to maintain its own manufacturing industry, Japan did not take corresponding interest rate hikes while the United States appreciated, which led to the further expansion of the damage of the depreciation of the yen.
South Korea started raising interest rates early, and the impact of this depreciation turmoil was not as drastic as Japan's.
It is worth mentioning that the Indonesian government's response to the currency depreciation has been very positive, and Indonesia's central bank has sold securities and bought a large number of rupiahs, which has slightly stopped the depreciation of Indonesia's currency.
The Federal Reserve's means of appreciating the dollar were extremely fast and the appreciation was large, and after the Sanskrit voices of various countries came, they took measures to resist it, and it was only on April 18 that it was able to stabilize the decline.
Currencies recovered
On April 18, the dollar index finally stopped rising, and the yen and won stopped depreciating, which was higher than before, but by April 18, the currencies of both countries had depreciated a lot.
Compared with the previous exchange rate, the yen has depreciated by 9% and the South Korean won has depreciated by 7% overall, and the two countries are facing the same crisis and have to issue a joint statement to protest to the United States.
As the "big brother" of Japan and South Korea, the United States must pay some attention to the attitudes of the two countries, at least on the bright side, the United States can no longer allow the dollar to appreciate.
Of course, if the United States keeps letting the dollar appreciate, Japan, South Korea and other countries also have ways to deal with it, such as depleting foreign exchange reserves to stabilize currency prices.
It's just that the impact of many means is too great, and Japan and South Korea don't want to go that way until they have to. Only those new industrial countries, which have neither international status nor the ability to resist the impact of the dollar's appreciation, gritted their teeth and suffered dumb losses.
Just because the dollar is appreciating for a while doesn't mean it's no longer appreciating. If the United States continues its current monetary policy, the monetary systems of Asian countries will be in jeopardy, and each country will have to show its own magic to ensure safe production at home.
Relying on the Bretton Woods system and its global navy, the United States established a global dollar trading system and relied on this system to harvest the world's wealth.
Every period of time, the United States will "flex its muscles" through the monetary system, so that the countries of the world understand who is the master of the world economy, and the currencies of all countries must bow to this.
If there is still no currency for settlement in the Asian region, the US dollar sanctions will continue.
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Resources:
The original article was published in China Fund News, "Release a Heavy Signal! Powell Speaks Out"
The original article was published in Beijing Business Daily, "South Korea and Japan jointly shout that the currencies of Asian countries rebound"
The original article was published in the Financial Associated Press: "Asian currencies are under pressure across the board: the yen loses 154, the won breaks 1400, and the Indian rupee hits a new low"
The original article was published in National Business Daily: "Blockbuster! "Currency War" Begins! Asian Currencies Encounter a Comprehensive Storm
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