In the past two years, the impact of factors such as the Federal Reserve's continuous interest rate hikes and geopolitical conflicts has caused the global foreign exchange market to be more than one.
In this context, the exchange rate of many national or regional currencies against the US dollar has declined significantly. Among them, the Argentine peso exchange rate fluctuates most significantly, depreciating against the US dollar by nearly 90% in the past two years.
Recently, the Egyptian pound will take over the Argentine peso and become the brightest "star" in the global currency depreciation.
On Wednesday, Beijing time, the Egyptian pound exchange rate against the US dollar was **3764%, once falling to $1 to 508 Egyptian pounds, a record low.
As a result, the Egyptian Stock Exchange's EGX 30 index also closed sharply lower by 302% to 2974311 o'clock.
Behind the violent interest rate hikes: rising inflation and foreign exchange shortages
There are two triggers for the sharp depreciation of the Egyptian pound:
First, the Central Bank of Egypt announced the liberalization of exchange rate controls, which will allow market forces to determine the foreign exchange rate, that is, allow the Egyptian pound exchange rate to float freely;
Second, the Bank of Egypt has also embarked on the path of "violent interest rate hikes".Announced an increase of 600 basis points in the key interest rate to 2725%
Actually,Egypt has raised interest rates several times since 2022, raising rates to 21 in early February this year25%, beating market expectations by 1925%。
The two "mines" thrown by the Central Bank of Egypt this time will inevitably cause panic in funds. The central bank of Egypt intends to alleviate the country's severe foreign exchange shortage and secure billions of dollars in new loans from the IMF, but the negative impact is also considerable.
Behind the liberalization of exchange rate controls and violent interest rate hikes, the situation in Egypt is not optimistic.
Egypt's domestic economy is not good, the data shows60% of Egypt's population lives below or near the poverty line. In early December last year, Egypt** increased its economic growth from 4 in FY2023 to 42% to 35%。
Egypt is currently facing two major problems: rising domestic inflation and a shortage of foreign exchange.
Egypt's inflation rate in 2023 has fluctuated at well above normal levels, with an average inflation rate expected to be 34 in 2023, according to a report by BMI Research, a subsidiary of Fitch Solutions1%, the highest level in many years. Inflation has not only hit Egyptians' spending power, but also weakened their confidence in the future, taking a toll on the Egyptian economy.
In terms of foreign exchange, Egypt has a serious shortage of foreign exchange.
In March 2016, the Central Bank of Egypt announced a "decoupling" from the US dollar, that is, a more liberal exchange rate regime, due to the severe shortage of US dollar reserves and other factors. But this was followed by the depreciation of the Egyptian pound and the financial crisis, and the tightening of the Federal Reserve's monetary policy in the past two years has exacerbated the shortage of foreign exchange in Egypt.
Egypt's non-oil imports fell by 22.4 billion U.S. dollars to US$57.4 billion in fiscal year 2022 and 2023 from US$73.8 billion in the previous fiscal year, according to the Bank of Egypt**2%。According to IMF data, Egypt's foreign exchange reserves in 2022 are only 95US$4.5 billion, down nearly 60% from 2021.
Based on the severe shortage of foreign exchange, the Bank of Egypt recently issued a statement saying:"The shortage of foreign exchange has recently dragged down the domestic economy, leading to the existence of parallel exchange rate markets, which have constrained economic growth. ”
The yen is also dangerous?
At the same time as the Egyptian pound depreciated sharply overnight, Japan on the west coast of the Pacific Ocean was also "ready to move" and eyed the measure of raising interest rates.
Recently, there was news thatDue to the upbeat wage situation, some ***, including the Ministry of Finance, support the Bank of Japan's recent interest rate hike. On the question of when the Bank of Japan will exit negative interest rates, Japan's largest bank expects the move to be introduced within two weeks and is adjusting accordingly.
And on Thursday afternoon, Bank of Japan Governor Kazuo Ueda spokeIf the price target can be achieved, the easing policy will be adjusted, and the probability of achieving the ** target is gradually rising.
Hiroyuki Seki, head of global markets business at Mitsubishi UFJ Financial Group, said recently"I think it is necessary for the Bank of Japan to end negative interest rates in March, not April. ”
Seki expects that after the BOJ raised interest rates for the first time since 2007 at its March meeting, it is likely that it will need another rate hike – raising the policy rate to 0 by October at the latest25% to ensure flexibility in future policies.
According to previous foreign media reports, according to the expectations reflected in the trend of the overnight index swap market,The probability of a rate hike at the Bank of Japan's March 18-19 meeting soared to 79% on Thursday.
Affected by these news, the yen ushered in a change. On 7 March, the JPY rose strongly, breaking above the 148 mark against the USD and hitting a one-month high.
Meanwhile, the Nikkei 225 fell from its highs in the morning, closing down 123%。
If the Bank of Japan does raise interest rates, it will be in stark contrast to the expectations of other major central banks, which are expected to cut rates this year.
There is an opinion thatJapan's interest rate hike will be a serious blow to the dollar. Once the yen raises interest rates, it may siphon out a large amount of liquidity from the European and American markets, which will have a serious impact on the U.S. bond market and become the fuse of the U.S. debt crisis.
Author: Far away.