Recently, there has been a wave of collective depreciation of non-US dollar currencies around the world. For example, my country’s renminbi, Russian ruble, and Japanese yen have all been relatively strong currencies in the past period of time, and there have also been eye-catching depreciations.

Behind the depreciation of these currencies is the joint cause of many factors, but there is one common reason, that is, the strong appreciation of the US dollar.

The first is the RMB. On August 15, the exchange rates of the onshore and offshore renminbi against the U.S. dollar once fell, reaching the lowest levels of 7.2899 and 7.3110 respectively, the lowest since November 2022.

Even worse is the Russian ruble. The change in the exchange rate of the ruble this year, among the currencies of all important countries, if ranked according to the worst, it can definitely occupy the top 3.

The ruble has experienced a rapid depreciation, once the depreciation broke through the 100 integer mark, reaching 101 rubles to 1 dollar. If December 1, 2022 is used as the starting point, the exchange rate of the ruble against the US dollar has depreciated by more than 60%.

The yen has also experienced a sharp depreciation recently, and the depreciation has reached the level where Japan officially intervenes in the exchange rate of the yen in September 2022.

On last Tuesday, the yen fell to a new low of 145.87 against the dollar. On September 22, 2022, when 145.90 yen was exchanged for 1 US dollar, it successfully broke the bottom line of the Bank of Japan.

The depreciation of currencies in so many countries has a common reason behind it, which is the strengthening of the US dollar.The strengthening of the dollar is mainly based on three reasons.

First, the U.S. economy showed relatively high resilience, which broke the market’s expectations that the U.S. economy would experience a rapid recession due to the Fed’s sharp rate hikes, and triggered investment institutions to turn to support the U.S. dollar;

Second, the Fed raised interest rates. The Federal Reserve chose to raise interest rates again in July, which also exceeded market expectations. This shows that the Fed believes that the U.S. economy will continue to grow.At the same time, the current interest rate in the United States has reached about 5%, which is higher than the level of many countries, which has also intensified the flow of funds to the United States.

Third, the fundamentals of the U.S. economy are better than other major economies recently, attracting global capital to invest in U.S. assets for safe-haven investment.

Post time: Aug-21-2023