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The pressure of multi-national currencies fell, the novel coronavirus exacerbated the global currency market turmoil

Posted on 2020-03-05 13:11 ET

For a long time, the foreign exchange market has been less volatile. However, according to Manuel Anders, a foreign exchange expert at the Bank of Bavaria in Germany, this stage may be over. "The era of low volatility in the foreign exchange market is over," he said.

Today, the currencies of some countries are under pressure. In addition to the Australian dollar, currencies of oil-exporting countries also fell. For example, since the beginning of this year, the Australian dollar has depreciated by about 8% against the US dollar, the Russian ruble has fallen by about 8% against the US dollar, and the Norwegian krone has fallen by about 6%. Some Asian currencies, including the Malaysian ringgit, are also under pressure.

Of course, exchange rate fluctuations are not just due to concerns about the economic impact of the new crown virus, but these effects play an important role. Andersch, a foreign exchange expert at the Bank of Bavaria, believes that the room for maneuver of central banks is an important factor affecting the trend of the foreign exchange market. In countries where central banks such as Australia and the United States still have room to maneuver, central banks may lower interest rates further, which often puts pressure on their currency exchange rates. On the other hand, Japan, Switzerland, and the European Central Bank have far fewer opportunities to take interest rate cuts and other forms of monetary easing. Currently, deposit rates in the eurozone are negative 0.5%, Japan is negative 0.1%, and Switzerland is negative 0.75%. To many economists and central bankers, their interest rates cannot be lowered further.

However, traditionally in a period of uncertainty, the US dollar, the world's reserve currency, has always been a "safe haven," and American investors have prominent importance for global capital markets. During times of crisis, American investors tend to bring their capital back to the United States, which will allow the dollar to appreciate. Anders noted that if the new crown pneumonia epidemic develops into a pandemic and the risk of recession increases globally, "in this case, the US dollar is particularly likely to benefit."

This result will have a huge shock to the global trade market. FAG bearings will overcome the suffering and work hard in this shock.


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