Currencies currently… The Russian ruble, Chinese yuan, and Argentine peso all slid in value this week. The ruble dropped to its lowest level since Russia’s invasion of Ukraine as President Putin’s country is increasingly cut off from the global economy. China’s yuan neared the record low it set in October as its economy struggles to bounce back from zero-Covid policies. Meanwhile, the Argentine gov’t intentionally knocked down its peso’s value by ~18% to get ahead of its downward spiral.
Depreciating: A weakening currency means paychecks don’t stretch as far while necessities can cost more, resulting in a vicious “make less, spend more” cycle. In Argentina, where inflation’s been 100%+, 4 in 10 people live in poverty.
Hiking: The central banks of Russia and Argentina raised interest rates this week to try to prevent their currencies from sliding further relative to the dollar.
Driving the slide… The balance of trade is tipping (in a bad way) for China and Russia, weakening their currencies on the world’s stage. Before the war in Ukraine, 74 Russian rubles would get you $1. Now you’d need ~100 rubles. Companies aren’t ordering as many goods from Russia and China as Western governments ramp up economic sanctions. Russians have historically bought dollars and euros to protect their savings from the ruble’s volatility, and they’ve been adding yuan this year as Russia’s relations with * gestures almost everywhere * sour.
Once trust is lost, it’s hard to get back… Just look at Argentina, where for decades the gov’t has been fighting a fall in the peso’s value. Argentines swap their pesos for USD at illegal hubs and quickly spend any pesos on hand before they lose value — further devaluing the currency. Argentines have lost so much confidence in the peso that a far-right candidate who wants to make USD the country’s main currency recently won the biggest share of primary-election votes.