Exchange-Rate Moves Reflect a Global Physical-Economic Collapse
April 27, 2022 (EIRNS)—Despite the fact that the U.S. Commerce Department is expected to report on April 28 a dismal 1-2% annual rate of GDP growth in the United States in the first quarter, the U.S. dollar has gotten extraordinarily strong against other major currencies since the start of this year. This is the period of real runaway global inflation, commodity shortages, supply shut-downs, bringing the world’s “financial haven” currency up sharply against other currencies being hit by physical-economic decline. The euro has fallen from $1.13 to just over $1.06 since the start of war in Ukraine. The Japanese yen is at a 20-year low vs. the dollar, and falling. The Chinese yuan has fallen from 6.3/dollar to below 6.6/dollar in two months. The Indian rupee is falling more slowly, by about 2% this month. The no-account British pound has fallen 12% in three months. The Turkish lira, Egyptian pound and Brazilian real have all fallen more sharply than any of these “advanced” currencies, and the developing nations as a whole are a rolling devaluation with painful economic effects.
This threatens masses of, especially, corporate debt with default, as well as foreign exchange derivatives contracts which did not anticipate such sharp changes in exchange rates. Remember the $5 trillion daily speculation in these rates as of 2012.
One currency of significance has moved up against the dollar during the war in Ukraine and the monster sanctions—the ruble, which is now at about 75/dollar. This is due primarily to capital controls by Russia since Feb. 28. There is anticipation of a further cut in the very high Bank of Russia central bank interest rate (now at 17%), when the bank makes a rate announcement on April 29.