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Financial Earthquake: RMB Plunges 1,700 Points, USD Soars
A Financial Storm That Caught Everyone Off Guard
In October 2024, a major event occurred in the global financial market—a major currency upheaval! It was like a sudden downpour that made many people's wallets tremble. The offshore renminbi exchange rate plummeted from 6.97 to 7.14, a drop of 1,700 basis points; the US dollar index rose from 100 to 104, a 4% increase; the euro broke through 1.08, and the yen fell from 140 to 150, devaluing by more than 7%! It was like a financial action blockbuster, only this time the main characters were the currencies in our hands.
The US Economic Data Performs Well, Reducing Expectations for Interest Rate Cuts
The US dollar's strength this time was not a coincidence. Look at the US economic data, all of which are very impressive! GDP growth rate, employment rate, consumer confidence index... all are continuously rising. As a result, expectations for interest rate cuts in the US have been reduced. Originally, people were looking forward to a 50 basis point rate cut in November, but now it seems that hope might be dashed. Even a 25 basis point rate cut has become uncertain. The US dollar, like Popeye after eating spinach, has suddenly become very powerful, suppressing other currencies to the point of breathlessness.
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Europe Faces Deflation Woes, CPI Dropped to 1.7%
Let's talk about the euro, which has not been doing well recently. Europe is facing tremendous deflationary pressure, with CPI dropping to 1.7%, lower than the 2% inflation target. Isn't that difficult enough? What's worse, the European Central Bank cut interest rates by 25 basis points in September, and the market predicts a 50 basis point rate cut next time. The euro, like a toy car that has lost its power, can only watch itself depreciate all the way.
Stock Market Plunges, Island Nation's Central Bank Chooses Inaction
The situation with the yen is also very worrying. Although CPI is above 2.5%, there is room for interest rate hikes, the island nation's central bank is not willing to act lightly. In August, as soon as the island nation's central bank raised interest rates by 10 basis points, the stock market immediately reacted—Nikkei 225 plummeted by 12% in a single day! Frightened, the island nation's central bank quickly stated: We will not raise interest rates when the stock market crashes! The yen, like a crazy roller coaster, has been bumpy all the way and finally had to reluctantly choose devaluation.
RMB Devaluation Mainly Affected by the Strengthening US Dollar, Not a Significant Depreciation
When it comes to the depreciation of the renminbi, many people may be worried. However, this time the depreciation of the renminbi is mainly due to the strengthening of the US dollar, not a problem with the renminbi itself. Moreover, compared with other currencies, the depreciation of the renminbi is not significant. Fluctuations in exchange rates are common, just like the weather, with sunny days and cloudy days. So, everyone, don't be too nervous.That being said, if the depreciation of the Chinese yuan continues for too long or is too significant, one must be cautious. This could potentially impact the stability of the domestic economy. At that point, issues such as rising prices and capital flight may arise. Therefore, we must always pay attention to the fluctuations in exchange rates and be prepared to respond.
The economy of Country M is very resilient, while European island nations are relatively weaker.
This global currency upheaval also reflects changes in the global economic landscape. In Country M, the economy is very resilient, akin to a warrior who can never be defeated. European countries and island nations, on the other hand, seem a bit weaker, like runners who start to tire halfway through a race. As for emerging market countries? They are seeking survival in a tight spot! In the future, the global economic landscape may further diverge, with the strong becoming stronger and the weak becoming weaker, a trend that may become increasingly apparent.
Appropriately increase foreign currency asset allocation and focus on investments that can combat inflation.
Faced with currency devaluation, we ordinary people cannot do nothing. We must find ways to respond. First, we can appropriately increase the allocation of foreign currency assets to diversify risks. For example, we can buy some US dollars, euros, and so on. Of course, we must also pay attention to risks and not invest everything at once.
Secondly, we can also focus on some investments that can combat inflation. For instance, gold is a good choice. Gold is like a safe, no matter how the currency depreciates, its value is always there.
Of course, the most important thing is that we must improve our own competitiveness! Learn more skills, gain more knowledge, and earn more money! Only in this way can we better cope with various economic changes!
Stay calm and don't let short-term fluctuations affect your judgment.
In the process of dealing with currency devaluation, we also need to pay attention to some small details. For example, we must stay calm! Don't panic just because the exchange rate falls. It's important to understand that exchange rate fluctuations are very common! We must not let temporary rises and falls affect our judgment.
Additionally, we must learn to diversify our investments! Don't put all your money in one place. If something goes wrong with that place one day, we will regret it. Therefore, we must learn to spread our money across different places! Only in this way can we better protect our interests!Compared to the past, emerging market countries have fared relatively better this time.
When it comes to this global monetary shift, it's actually a bit different from the financial crisis of 2008. Back then, the US dollar also became very strong! However, the impact on emerging market countries was much greater than this time. This time around? Although there are impacts! Relatively speaking! It's still better.
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