Friday, August 10, 2018

Dollar jumps to highest level in over a year as China and emerging markets see their currencies decline in liquidity pinch

For the first time in over a year, the dollar rose to over 96 on the dollar index in the midst of a liquidity pinch that is crushing emerging markets.

Turkey's national currency, the lira, hit new record lows against the US dollar and euro with a 6 percent fall amid strains with the United States showing no sign of de-escalation. 
The lira was trading at 5.9 to the US dollar, a loss on the day of more than 6 percent. The lira has weakened nearly 37 percent since the beginning of the year, though it had recovered some losses. – Sputnik News
Turkey of course is not the only country dealing with the rising cost of buying dollars as China has been forced to devalue the Yuan multiple times here in 2018 to offset the Federal Reserve's raising of interest rates, and President Trump's new policy of a tariff based trade war.
China’s yuan is set to extend its record weekly losing streak on Friday, three years after the nation attempted to reform the exchange rate that had sent shock waves across the global stock and currency markets. 
The People’s Bank of China devalued the yuan by nearly 3 per cent against the US dollar in two days from August 11, 2015, a move it said was a free-market reform but had sparked market concerns that it was engaging in a currency war to boost competitiveness of its exports. 
Since then, the central bank has imposed harsh capital controls, squeezed interest rates and burned through nearly US$320 billion of its foreign currency reserves to support the currency and quell market panic. 
On Friday, the yuan dropped 0.46 per cent to 6.7751 per dollar, heading for its ninth week of declines, weighed by a crisis in Turkey that is causing traders to offload risky emerging markets and Asian currencies while buying the safe-haven US dollar. – South China Morning Post
While the U.S. may be winning the currency war for the moment, they are far from winning the trade war Trump embarked on as a focal point to his campaign promises.  And with the Fed working at cross-purposes with the President in regards to Trump's desire for a weaker dollar, the end result could be the acceleration of a global recession, and the implosion of economies all across the Eurasian landscape.

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