Dear Toutiao users, especially our middle-aged and elderly friends, have you noticed the recent "thrilling" news about the Asian currency market?Japanese yen, South Korean won, Indian rupee, Vietnamese dong, Philippine peso...... These Asian currencies, which you may have heard about in travel and news reports, are now facing a severe test of "collective diving". Some people exclaimed: "Is this another Asian currency defense war?" Today, we will unveil the mystery of this financial turmoil, so that you can understand it as soon as you hear it, and understand why it is as soon as you read it.
What is a currency crash?
First of all, we have to understand what a "currency crash" is. To put it simply, it is like the "purchasing power" of the renminbi in your hands against the US dollar has suddenly shrunk significantly. What used to be worth $1 can now be exchanged for less. This is the depreciation of the currency, that is, the "plummet". So why is this happening?
The Blame for the Dollar's Interest Rate Hike: Global Money Rushes to "Loan Sharks"
One of the main culprits is the United States on the other side of the ocean - the Federal Reserve has raised interest rates continuously since 2022, which has caused the interest rate on dollar deposits to rise. Imagine if you had some spare money, would you rather put it in a bank with an interest rate of only 1%, or choose a U.S. bank with an interest rate of up to 5% or more? As a result, funds from all over the world have poured into the dollar, and the demand for the dollar has surged, and prices have naturally risen, while other currencies have become "unpleasant" in comparison, and have been sold off in large quantities, leading to depreciation.
Why are Asian currencies particularly "vulnerable"?
As developing countries, many countries in Asia do not have a solid monetary foundation, and like a frail and sickly child, they are naturally more sensitive to the turbulent fluctuations of the financial market. In addition, the prices of the stock market, property market and even various commodities in these countries are often closely linked to the exchange rate of the local currency, and once the currency devalues, it is like a chain reaction, and the entire economy will be affected.
The "short-selling" black hand behind the yen's plunge
In this depreciation storm, the yen has performed particularly "disastrously", hitting a record low in 34 years, with a depreciation of as much as 30%. In addition to the overstrength of the US dollar, the yen has also been attacked by "shorting". Going short is like a gambler betting that something will fall and then making a profit. This time, hedge funds targeted the yen, believing it to be a "soft persimmon" and scrambling to short, and the harder the yen fell, the more they earned.
The "oolong" of the yen rate hike and the market panic
The yen has become a "borrowing paradise" for global funds because of its long-term low or even negative interest rates. However, the recent abrupt announcement of a rate hike in Japan, albeit by a negligible amount (just 0.1%), caused a strong shock in the market. Investors originally thought that the yen would continue to maintain a state of "cheap borrowing", but they did not expect the sudden change of fortune and the further strengthening of the expectation of a US dollar interest rate hike, and the interest rate gap between the two may continue to widen. This series of operations caused a sharp decline in the market's confidence in the yen and accelerated the depreciation of the yen.
Asian countries are responding urgently, and the battle to defend them is about to break out
Seeing that the yen, the South Korean won, and other currencies are falling like free fall, how can Asian countries sit idly by? The Philippines, Thailand, Indonesia, and other countries have taken action one after another. Some have raised interest rates urgently to attract capital back, some have canceled interest rate cuts to prevent further currency depreciation, and some countries have directly used their foreign exchange reserves to buy their own currencies in an attempt to stabilize the exchange rate. Countries have different approaches, but they have the same goal: to defend their currencies against the financial turmoil.
What is the impact on our people, and how to deal with it?
At the beginning, we mentioned that what impact will this big drama of the collective collapse of Asian currencies have on the lives of our ordinary people? Especially for our middle-aged and elderly friends, what we are concerned about is whether the money in our hands will "shrink" and whether our daily life will be affected. At present, for you in China, the impact is relatively limited, especially for friends with a monthly salary of 3000, and the cost of living will not fluctuate significantly in the short term.
However, in the long run, changes in the international financial market will also have an indirect impact on the mainland's economy and exchange rate policy. As savvy financial managers, we can focus on the following points:
1. Asset allocation: Properly understand and consider adjusting household asset allocation, such as holding an appropriate amount of US dollar assets to diversify risks, but pay attention to the need to be cautious in investment and avoid blindly following the trend.
2. Pay attention to policy developments: Pay attention to domestic economic policies, exchange rate changes and other information so that you can adjust your consumption and investment strategies in a timely manner.
3. Living expenses: For those who need to travel and shop abroad, it may be more cost-effective to spend there taking advantage of the depreciation of the currencies of some Asian countries. However, it is also important to pay attention to travel safety and the epidemic situation in the destination.
In general, the smoke of the Asian currency defense war has already spread, and countries are actively responding to this financial turmoil. As ordinary people, although we can't go into battle in person, we can build a solid line of defense for our "money bags" through rational observation and scientific financial management. No matter how stormy the outside world is, we can enjoy the tranquility and beauty of life in our later years.