Currencies get under pressure

Published on: 25-May-2020
Category: Trading
Last updated: 25-May-2020

Currencies get under pressure

The initial shock of the impact of the corona pandemic appears to have been overcome, but the peak of the crisis is far from over. This primarily affects emerging markets and their currencies.

Turkey is threatened with a state bankruptcy and with it the second recession within two years. The Turkish lira has lost over 20 percent of its value since the onset of the corona crisis and has risen to a record low of 7.29 lira for one dollar. The Turkish media spoke of an "attack on Turkey" and the government banned some foreign banks from trading the lira. The accusation of currency manipulation also came up. Foreign financial experts are of the opinion that the Turkish central bank is running out of options to defend the lira and the government is therefore accusing other financial institutions. The country lacks the income from tourism and exports. To help the currency up, the central bank has now issued new money. The reserves have dropped from 40 billion to 28 billion lira.

South American and African countries also have significant problems in meeting their liabilities. The Brazilian Real and the South African Rand have lost about a third of their value in two months. The Peso is also under pressure in Mexico. The Institute of International Finance (IIF) announced that investors pulled $ 83.3 billion from emerging markets in March. Three of these countries were already unable to service their bonds. These include Argentina, Ecuador and Lebanon. Brazil is also threatened with bankruptcy, because President Jair Bolsonaro has not believed in a corona crisis for a long time.

But there could be a change in Asia. China recovered economically in April and could thus expand its status as an international world power. It is difficult to predict how the US will emerge from the corona crisis, especially since the presidential election is due in November.


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