Currency News: China’s foreign currency reserves, Brexit aftermath and Afghan ban of Pakistani currency
Currency News
Currency News: China’s foreign currency reserves, Brexit aftermath and Afghan ban of Pakistani currency
China’s foreign currency reserves have fallen slightly in the latest figures. Which might be showing that the country is still a currency manipulator. Indeed, it manipulates the value of the yuan up, not down. Thus producing exactly the opposite to the effect alleged. This makes exports from China more expensive for us and our imports cheaper for them.
Because of this unexpected slowdown in economic activity, the first casualty of the Brexit vote was the British pound, which significantly depreciated against other major currencies. On the one hand, major British exporters will benefit from the declining pound because their domestic costs will now be lower; at the same time, the value of their exports will proportionally increase. Domestic producers that use a lot of imported components will see their costs increase and their profits evaporate. The effect of Brexit is not limited to the UK economy: If British consumers and businesses decrease their imports from abroad, they will cause other economies to slow down. That’s why stock markets all across Europe declined in the immediate aftermath of the vote. And since the U.K. is one of the largest importers from Asian countries including China and Japan, Brexit also caused a sharp negative reaction in Asian stock markets. That’s why Brexit will inevitably increase the friction between the UK and its international trading partners. Moreover, the prospect of a worldwide economic slowdown is now plausible because global business is interconnected.
A senior Afghan police official, Abdul Raziq, has banned the use of the Pakistani currency. He has declared the use of the Pakistani rupee in business transactions a crime. The rupee has been widely used in Afghanistan’s eastern and southern provinces bordering Pakistan. Traders said it had an immediate effect, with the afghani strengthening in recent days. Indeed, the afghani had strengthened to 560 for 1,000 Pakistani rupees, from 630 per 1,000 before the ban. The official Central Bank exchange rate Sunday was 622 per 1,000. Moreover, the afghani has also strengthened against the dollar.
