SMU Currency Analysis: World Currency Markets in Turmoil

In the last months, 14 of the 16 currencies that Steel Market Update tracks were down against the dollar, led by Turkey down by 29.4 percent, and Russia and South Africa both down by 8.5 percent. The Chinese yuan has declined by 7.9 percent in the last three months. Please see the end of this report for an explanation of data sources.

The Fed kept its benchmark interest rate unchanged in July, but is widely expected to hike it again in September. MarketsNow had this to say on Aug 9: “The narrative driving the buck today is based on diverging rate hike expectations. As the U.S. Federal Reserve contends with accelerating growth, inflation and wage costs, the institution is expected to keep hiking rates. Growth and inflation are decelerating in most major regions outside the United States and for these reasons other central banks such as the European Central Bank, the Bank of Japan and the Reserve Bank of Australia are unable to hike rates. Given the growing divergence between the U.S. and other parts of the world, the U.S. dollar is rallying accordingly.”