Financial market turmoil… At the point of the shock experienced by Asian indices, the weak economic performance in currencies and the unbalanced movements due to the interest rate differences and the effects of continuous depreciation are visible. Factors such as the negative economic performance effect of the Covid closures implemented in China, Japan's imposition of spread control while maintaining its loose monetary policy, and the Fed-PBOC divergence are the main lines of the movement triggered in the currencies at the moment.
Historical comparison of CNY and JPY rates… Source: Bloomberg
Volatility of Asian currencies… Economic threat Considering the movements in China's currency, we observe that the worse levels of the current direction coincided with the recent devaluation of the 2015 yuan on the chart, and between the 2018 - 2020 Trump period and the Covid crisis. Why is this important? We are moving towards the economic recession effect of the Covid closures, which are also interpreted as China's economic and political imposition, at least on a regional basis. We observe that the JPY situation has become more volatile after 2020. Interestingly, these two countries are implied by the US as currency manipulators.
Conclusion? Geopolitical risks added to the effects of economic slowdown may cause these exchange rates to remain active in the future. Considering that China and Japan are the largest holders of UST, they also indirectly affect US returns. This time, we may be faced with the overvalued situation of the dollar. Foreign trade has recently come to the fore in terms of global competition in the economic perspective of Asian countries, and the dollar, which moves with the wind from the Fed, has the potential to increase some imbalances in terms of inflation and foreign trade.
Kaynak Tera Yatırım
Hibya Haber Ajansı
