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2022-04-30

The Ruble has become the fastest growing currency on the planet

The ruble has become the fastest growing currency on the planet since the start of the  special military operation (SMO)  in Ukraine. Surprisingly, "the world broke down" after the start of the SMO - all currencies crashed against the dollar and only the ruble is growing. It makes no sense to compare to any of the dates in March, because the ruble will be better than all other currencies due to the base effect, so I took the cutoff 4 days before the SMO.

Biden promised that the Russian financial system would split and the ruble would fall into hell, but the opposite happened. The ruble strengthened by almost 8%, the real is in second place with a strengthening of 3.4%. All other currencies fell against the dollar. The strongest fall against the dollar was in Hungary - the dollar rose by 14%, followed by Japan +12.8%. Further Poland 11.2%, Turkey 9%, Czech Republic 8.6%, UK 9.3%

I wonder why such movements in such a short period of time are anomalous. There was no such growth of the dollar even in March 2020, the last analogues are March 2015, October 2011 and May 2010. All currencies are falling and only the ruble is growing! Here, of course, the trends towards tightening the monetary policy of the Fed and foreign exchange control in Russia coincided, but the fact itself.

About the impact of a strong dollar on capital flows...

The yen has fallen 20% against the dollar in a year. The current account in Japan was almost zero at the end of 2021 - only plus $ 15 billion against the "norm" of 45-50 billion in the period from 2015 to 2020.

At the same time, the trade balance of goods and services at the end of 2021 went negative by $15 billion. The main reason is expensive raw materials. For example, in 2019 raw materials accounted for about 38% in the structure of imports of goods, in 2022 raw materials can reach 80-85% in the structure of imports.

The key raw material positions that Japan imports have risen in price in the first 4 months of 2022 relative to 2021 by about 80% in dollars, and a revaluation in yen by 20%. There is no doubt that the current account will go far into the red.

Why is it important? Japan is the absolute leader in the supply of financial capital to the United States, both direct and portfolio investment. The source of supply is the current account.

Also, when the yen falls, the Japanese usually repatriate foreign assets back to Japan, the non-resident carry trade is curtailed. The US will be very hurt and bad without Japan.

Source: https://spydell.livejournal.com/721583.html

 

 

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