Recently, many economists and financial institutions have come up with a very terrible corollary – the Fed is likely to raise interest rates four times this year. Affected by this, the Hong Kong dollar tumbled to a 33-year low last month. Seeing that we must break through the psychological threshold of “7.85”, the Hong Kong Monetary Authority was forced to once again set off the Hong Kong dollar’s defense and used more than 20 billion Hong Kong dollar foreign exchange reserves to stabilize the situation. . Today, Hong Kong, China, has just relived its turmoil, and a large number of countries are also caught in the same dangerous situation!
The Argentine currency collapsed, emergency use of 10 billion foreign reserves, crazy increase interest rate to 40%!
According to reports, on May 3, local time, the Argentine peso fell by 7.8% against the US dollar for a time, which was the largest since the country achieved a free floating exchange rate; Argentina’s century bond price also hit a record low, and the yield rose to 8.199%. In general, exchange rate fluctuations of more than 1% in the general country are no small fluctuations. However, since the beginning of this year, the cumulative decline of the Argentine peso against the US dollar has already reached more than 15%, and it is subject to very great pressure for devaluation.
To curb the rapid decline of the peso, the Bank of Argentina first announced a rate hike of 300 basis points, raising the benchmark interest rate from the previous 27.25% to 30.25%, and firing the first shot of the “peso defending battle”. But this time the effect of the bailout was not good, and the plunging trend of the peso still did not stop. The central bank raised the interest rate by 300 basis points again on May 3. However, the plunge of the peso still continued, and Argentina was forced to make heavy fists again. On May 4th, the rate hike was 675 basis points. At this time, the interest rate has reached 40% (which means that the bank deposits 100 yuan each year. Up to 40 yuan in interest).
The rate of interest rate increases this time, it takes almost 20 years for normal countries to complete, and Argentina has also paid a very heavy price – it consumes a lot of valuable foreign exchange reserves. It is reported that the Argentine Central Bank has used 6.777 billion U.S. dollars of foreign exchange reserves in March and April of this year. If we count the 4.8 billion U.S. dollars that were spent on these occasions, Argentina has already consumed more than 10 billion U.S. dollars to support the peso exchange rate. With 20% of its total foreign exchange reserves (Argentina currently owns only $56.7 billion in foreign exchange reserves), economists expect it to be just the beginning!
The Fed lifted a butcher knife. Turkey, Poland, etc. also became lambs to be slaughtered.
In fact, Argentina’s experience of being forced to raise interest rates three times in eight days is not an example. Many emerging market countries’ currencies have been criticized. In Turkey, the continuous collapse of the Lira against the US dollar has hit a historical low; even in Poland, where the economy is doing well, the country’s currency zloty is still being sold. According to JPMorgan Chase, emerging market currencies such as the Russian Ruble, Brazilian Real, Turkish Lira, and South African Rand have fallen as much as 5% since April.
Although there are also many problems within these countries, the “culprit” that caused this situation is exactly the United States. Since December 2015, the Fed has raised interest rates six times. If the rate is actually increased four times this year (the rate has been raised once in March this year), the dollar will continue to strengthen and the yield on US Treasury will be pushed up. In this context, more and more investors have started to sell currencies, stocks and bonds in emerging markets, which has brought tremendous pressure on these economies and even evolved into a “financial slaughter!”
Historically, the Fed’s interest rate hikes have had little effect on countries with stable economies and rich foreign reserves. Countries with weak economic structures and insufficient foreign exchange savings often fall into economic collapse. This time, Argentina and other countries have become under the butcher’s knife. The lamb is left to die. The British “Financial Times” said that if the US dollar continues to strengthen in the future, it may trigger longer-term and larger-scale selling of assets in emerging markets, and countries such as Argentina and Turkey will face more pain.
At the time of writing the price of the earthcoin(EAC): ¥ 0.00677