Latest news with #currencydecline
Globe and Mail
a day ago
- Business
- Globe and Mail
The crumbling greenback
As of mid-2025, the U.S. dollar has dropped over 12% against a basket of currencies that matter (see chart of Dollar Index), More striking, the fallout in 2025 represents the sharpest decline in over 50 years. Economists have posited several reasons for the dollar's decline. Slowing U.S. growth, stubborn inflation and ever-changing trade policies top the list. And in many ways these factors are interrelated. President Trump's erratic trade policies that focused on countries where the U.S. had a trade deficit likely caused the initial decline. That is not surprising because the currency market is the first to feel the initial impact of major policy shifts. In this case, U.S. companies imported excess supply to front-run tariffs, causing the trade deficit to widen, which by extension, increases demand for foreign currencies. Since currency markets are circular in nature and a zero-sum game (what is good for one country is bad for another), increasing demand for foreign currencies reduces demand for the domestic currency, which leads to currency depreciation. That said, this is likely a short-term phenomenon that will stabilize once the markets have clarity on the end game for tariffs. When we reach the tariff end game, we will have a better understanding about how this policy shift will impact U.S. inflation and growth which will have a more lasting impact on the trajectory of the U.S. dollar. The inflation/growth components are most worrisome for the Federal Reserve Board (Fed), which is why the Federal Open Market Committee (FOMC) has been reluctant to cut interest rates. If excess tariffs cause inflation to rise (something we have seen in the last two monthly reports from the U.S. Department of Labor) in an environment where growth is slowing, the result is stagflation. That scenario limits any policy moves the Fed has in its playbook. Raising rates to combat inflation will slow economic activity, while lowering rates to stimulate activity will lead to higher prices. A classic catch-22! U.S. debt mountain There is also concern about the mountain of U.S. debt. The tax-and-spend bill that was signed into law on July 4 will add between US$3 trillion and US$8 trillion in new debt depending on which side of the political spectrum the numbers are being calculated. That is on top of the current US$31.5 trillion in debt, which eventually – no matter what additional debt numbers you choose to believe – will make interest payments on the debt the largest single expense in the U.S. Treasury. The U.S. debt and deficits summon up Thelma and Louise's exit scene over Dead Horse Point. Concerns about the U.S. debt level is likely why we have seen a surge in gold prices, strengthening foreign currencies, and increased investment in international equity markets. It also draws into question whether the U.S. dollar will continue to be the world's reserve currency. Leading this charge are Brazil, Russia, India and China (the BRICs), which have been amassing their gold reserves in the hope they can compete with the U.S. dollar as the world's reserve currency. This is a longer-term strategy that will not likely displace the U.S. dollar for at least 10 years. But if the fragmented U.S. trade policy continues to act like a leaf blowing in the wind, it could become a serious threat. Should the U.S. dollar lose its reserve status, it will have major implications for U.S. debt levels. That was likely why Trump threatened Brazil with the imposition of a 50% tariff. Brazil is a country with which the U.S. has a trade surplus. The unhinged position that the tariff threat was related to the former President Jair Bolsonaro's legal woes is simply a Trump deflection. It also provides Trump with the authority to issue the proclamation by claiming it is in the national interest of the U.S. Richard Croft is Founder, Chief Investment Officer, and Portfolio Manager of R.N. Croft Financial Group Inc. Disclaimers Content © 2025 by R.N. Croft Financial Group Inc. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited. Used with permission. Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Investment funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently, and past performance may not be repeated. The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice. R N Croft Financial Group Inc. is a Licensed Discretionary Portfolio Management and Investment Fund Management company serving investors and investment professionals across Canada since 1993.
Bloomberg
17-06-2025
- Business
- Bloomberg
Philippine Peso Heads for Longest Losing Run in Over a Year
The Philippine peso is on track for its longest stretch of losses in more than a year, weighed down by a surge in global oil prices. The currency weakened as much as 0.5% to 56.7 per dollar on Tuesday, poised for a sixth consecutive day of declines — the longest losing streak since April 2024. The peso has lost 1.6% so far in June, making it the worst-performing emerging market currency this month.
Bloomberg
04-06-2025
- Business
- Bloomberg
Bangladesh Taka Will Extend Slide on Election, Tariffs, BMI Says
The Bangladesh taka is set to extend this year's decline due to potential political instability in the South Asian country and the increase in US tariffs, according to BMI, a unit of Fitch Solutions. The currency is forecast to average 125 per dollar over the year as a whole, said Sayaka Shiba, senior country risk analyst at the research firm in Singapore. That compares to an average of 115.35 during 2024 and Tuesday's close of 121.86, according to data compiled by Bloomberg.
Reuters
09-05-2025
- Business
- Reuters
Rupee likely to weaken more on widening India-Pakistan conflict
MUMBAI, May 9 (Reuters) - The Indian rupee looks set to decline further on Friday, pressured by the widening conflict between India and Pakistan that may trigger increase hedging and speculative activity. The 1-month non-deliverable forward indicated that the rupee will open at 85.80 to 85.90 to the U.S. dollar compared with 85.71 in the previous session. The rupee on Wednesday slumped 1.04%, recording its worst session in more than two years. The currency came under pressure in the afternoon session after India reported Pakistan's attempts to engage military targets. "Until yesterday afternoon, markets had largely priced in a view that there would be no meaningful worsening in India-Pakistan tensions," a currency trader at a Mumbai-based bank said. "That assumption is now being reassessed, and positioning in the rupee will likely need to be adjusted accordingly," and it may lead to a pick-up in hedging and speculative activity, the trader said. Pakistan and India accused each other of launching drone attacks on Thursday, and Islamabad's Defense Minister said further retaliation was 'increasingly certain'. India said military stations were attacked by Pakistani drones and missiles. Indian equities were set to open more than 1% lower. In the two sessions following the rise in tensions, the activity of foreign investors indicates that they largely held the view that the situation would not have a lasting impact on the Indian economy, analysts said. Preliminary data showed that foreign investors were net buyers of Indian equities on Thursday, after buying approximately $350 million on Wednesday. "It will be interesting to see how the numbers pan out in today's session. There's a sense that the landscape has shifted,' said Kunal Kurani, Assistant Vice President at Mecklai Financial. Other Asian currencies largely weakened on Friday, while the U.S. dollar rose against its major counterparts, creating additional headwinds for the rupee. KEY INDICATORS: ** One-month non-deliverable rupee forward at 86.12; onshore one-month forward premium at 18.75 paise ** Dollar index up at 100.76 ** Brent crude futures up 0.1% at $62.9 per barrel ** Ten-year U.S. note yield at 4.37% ** As per NSDL data, foreign investors bought a net $349.1 mln worth of Indian shares on May 7 ** NSDL data shows foreign investors sold a net $115.7 mln worth of Indian bonds on May 7
