Mountainman: Have You Ever felt Like You are "TREADING WATER"......FINANCIALLY or in Other TERMS....So to Speak???......
Well I Surely "KNOW" the FEELING.........and It is "APPARENT" CHINA and A "HOST" of Other COUNTRIES/STARS.....Are "FALLING" as their Respective MARKETS Adjust to their "TRUE ASSETS/VALUES" ........
To Put it in SIMPLE TERMS.......They "ALL" have to PROVE their INDEPENDENT WORTH/VALUES.....= No MORE MANIPULATION.......
So From EUROPE. ASIA, SOUTH AMERICA and NORTH AMERICA= YES The GOOD Old USA....to the MIDDLE EAST !!!!!!!!
The "GLOBAL TRANSFORMATION" of ECONOMIES is Rapidly Underway........
So this Op Ed Article Unveils some REALITY to WHAT/WHY.....Countries are Seeing their CURRENCIES/MARKETS Devalued=
WHY ??? they are "TREADING WATER"........................IMO
For Us We are waiting to SEE The US and Many Others New VALUES ARISE......Like LAZARUS fromthe TOMB of "FIAT".....So to speak....LOL......
Make No Mistake the "CRUNCH" will be Felt and will be Painful......but WHAT ARISES Will be QUITE VALUABLE.......From DEATH to LIFE...so to Speak.....and it "MUST" be this WAY for The "FRUIT" to "ABOUND" to Others around Us.....
Many of Us are "HURTING" in VARIOUS Ways "CURRENTLY".........but "HANG TOUGH"...........These COUNTRIES...Like Many of Us........ Are Barely Keeping Their HEADS Above the WATER!!!!!!!!
THIS ARTICLE IS "FULL" OF GOLD....."IF" You DIG A LITTLE!!!!!!!!...IMO...."BE BLESSED"
ThunderHawk » February 25th, 2016, 12:34pm GMT+7
The Dollar’s Ascent Could Be in Its Final Phase
• The U.S. dollar’s five-year-long bull run may be coming to an end, particularly
relative to major currencies such as the euro and the yen.
• The headwind of a strong dollar should diminish for global and international
• Interest rate differentials and exchange rates do not always move in lockstep, so the
Federal Reserve’s rate decisions won’t necessarily dictate what’s next for the dollar.
• China’s apparent commitment to continue to devalue its currency is expected to
cast a shadow over currencies in Asia and several other emerging markets.
• As emerging economies adjust to weaker global industrial activity and Chinese
growth that is slower and less commodity-intensive, some currencies may continue
to weaken — but there are bright spots.
“There’s good reason to believe
that the strong dollar should
become less of a headwind for
global and international stock
portfolios. The dollar’s current
appreciation phase ... may run its
course by the end of 2016.”
Dollar’s Climb Against the Euro and
Yen May Be Ending
Virtually every currency weakened
against the dollar in 2015 — in many
cases recording double-digit percentage
declines. Overall, currency translation
has, therefore, tended to have a negative
impact on international and global stock
and bond portfolios for U.S. dollar–based
investors. But with the U.S. Federal
Reserve having raised interest rates in
December for the first time since 2006,
many investors are wondering what’s next
for the dollar.
Conventional wisdom holds that the
dollar bull market could be with us for an
extended period, thanks to higher U.S.
interest rates at a time when central banks
in the euro zone, Japan and many other
economies are still loosening monetary
conditions. Investor capital, the argument
goes, tends to flow toward economies
where higher interest rates are available.
Those who believe the dollar bull will
run and run may also be taking their cue
from dollar appreciation in the 1980s.
That was a classic tale of a strong U.S.
economy decoupling from weak growth
in the rest of the world. Among other
factors, relatively high inflation outside
of the U.S. gave the dollar scope to
appreciate without greatly hindering
However, today’s backdrop looks quite
different. The global economy and markets
are arguably more interconnected; China’s
economic clout is much greater; inflation
is low in the U.S and elsewhere; and many
currencies have already endured substantial
declines against the dollar.
There’s actually good reason to believe
that the strong dollar should become less
of a headwind for global and international
stock portfolios. The dollar’s current
appreciation phase, which began in 2011
and accelerated in mid-2014, may run its
course by the end of 2016. Why, exactly?
For starters, history shows that higher
interest rates do not necessarily lead to
Even if the Federal
Reserve does continue to raise rates,
dollar appreciation is not inevitable.
Arguably, trends in corporate capital
expenditure can have more of an impact.
For example, corporate America’s move
to onshore manufacturing and operations
is part of the reason that the dollar bear
gave way to the bull in 2011.
On the other hand, inflation and significant
trade and economic imbalances — two
factors that leave currencies vulnerable
to weakening — are absent from the
euro zone and Japan. The concept of
purchasing power parity (PPP) can be
helpful in discerning whether a currency’s
value seems reasonable.
“Further sustained and
substantial weakening of
the euro and yen against the
dollar appears unlikely.”
In simple terms, PPP defines the exchange
rate at which two different currencies
would have the same purchasing power
in their respective economies. The euro
entered 2016 with a value that is about
15% below where, in PPP terms, it might
be expected to be versus the dollar; while
for the Japanese yen the undervaluation
appeared closer to 25%. Sooner or later, it
is sensible to expect these exchange rates
will move closer to reasonable valuations.
For all these reasons, further sustained and
substantial weakening of the euro and yen
against the dollar appears unlikely. That
said, the yen may temporarily depreciate if
negative interest rates are lowered further
or the Japanese government intervenes in
China’s Transition and Devaluation
Cast a Long Shadow
China’s move away from investment-led
growth toward an economic structure
more reliant on consumption has ushered
in a painful period of adjustment for
some economies. To varying degrees, the
economies and currencies of commodity exporting
nations such as Australia, Brazil,
Indonesia and South Africa are feeling
the direct and indirect consequences of
changes in the nature of Chinese demand.
Monetary and exchange-rate policy
in China has been evolving and it’s
fair to say some official actions have
proven controversial. China’s currency
devaluation in January 2016 was a case in
point. The move rocked financial markets,
prompting accusations that China was
risking a currency war as it sought to make
its exports competitive.
However, with some perspective, these
policy efforts shouldn’t be that much of
a surprise. In the past couple of years,
China has devalued four times. It has also
repeatedly tapped foreign-exchange
reserves to try to stabilize its currency.
Rather than competitive devaluation, it
seems that Chinese authorities are using
currency as another tool to deal with the
$15 trillion of debt that has built up in
the economy since 2008.
Devaluation,alongside cuts to interest rates and
bank reserve requirements, creates easy
monetary conditions, with the goal of
promoting inflation and thereby reducing
the real cost of debt. This is a textbook
approach to dealing with a credit overhang,
known as inflating away debt. Although the
renminbi has shed more than 6% against
the dollar over the past two years, it still
could be overvalued by about 10%–15%.
A New Renminbi?
In December 2015, the People’s Bank
of China announced that it would
consider the value of the renminbi in
reference to a basket of currencies.
The China Foreign Exchange Trade
System Renminbi Index has emerged
as the de facto measure of the effective
exchange rate; it reflects the renminbi’s
value relative to a trade-weighted
basket of currencies.
• The dollar may not strengthen much
more against the euro and the yen,
and currency translation could soon
become a tailwind for dollar-based
investors in the euro zone and Japan.
• Some emerging markets currencies
appear vulnerable to further losses
against the dollar and other major
• For global bond investors, select
emerging markets currencies may
be approaching attractive valuations --
creating compelling longer term
total return potential in local currency
• Compared to recent history, currency
translation could soon begin to have
more of a neutral or positive impact
on total returns for dollar-based
investors’ global stock and bond
Devaluation has shaken confidence among
China’s local investors, leading to stock
market volatility and capital flight as China
residents move money abroad. These
developments present real challenges for
Chinese policymakers, and stock markets
there could be quite bumpy in coming
years despite authorities’ best efforts.
Looking forward, China will likely continue
to have a wide-ranging impact, and not just
on the currencies of commodity-exporting
nations. For example, currencies of Asian
nations whose economies are closely tied
to the fortunes of China — either because
they benefit from Chinese demand or
because Chinese exporters represent their
main competition in export markets — are
clearly at risk of depreciating against the
Even the U.S. could be affected.
Chinese demand has come to account for
a much greater share of U.S. corporate
earnings growth over the past decade. If
earnings expansion in the U.S. is held back
by slower Chinese growth, the ramifications
for the U.S. economy could mean that the
Fed may not hike as much as currently
expected. Indeed, this scenario may even
increase the chances of a Fed rate cut or
official bond buying (quantitative easing) --
policy moves that could very well stop the
dollar in its tracks.
Emerging Markets Currencies:
Amid Broad Challenges There Are
Many developing economies are only
partway through a difficult period of
adjustment. Unfortunately, until more
pronounced structural reforms are
implemented, currency weakness and
volatility are the mechanisms through which
these necessary adjustments are unfolding.
That said, it’s important to note that
emerging markets are not all the same.
Some economies, such as Brazil, have much
greater exposure to China by virtue of their
heavy dependence on commodities exports.
Others, such as Mexico, are more closely
tied to U.S. economic fortunes. Healthy
growth and inflation prospects are evident
in India, but the economic outlook in Russia
Consequently, not all emerging
markets currencies are in the same boat.
Brazil, Russia and South Africa are
confronting various economic and trade
imbalances alongside inflation. They also
have political environments that offer little
prospect for the kinds of structural reforms
that could heal their economies.
the Brazilian real, the Russian ruble and the
South African rand all appear vulnerable to
further declines against the dollar — even
though they entered 2016 with valuations
in excess of 25% below what might be
considered reasonable levels.
On the other hand, the Hungarian forint, the
Mexican peso and the Polish zloty appeared
undervalued versus the dollar in early 2016;
all three economies seem free of large
imbalances and inflationary pressures.
These currencies have suffered declines
as part of the broader sell-off in emerging
markets, and local-currency debt from these
markets currently offer attractive return
potential for emerging markets debt and
global bond portfolios.
In the near term, weaker currencies can
hurt economies by stoking inflation, but in
time there is often a silver lining: improved
competitiveness and, hopefully, economic
reforms. The fact that most emerging
markets currencies are now free floating --
rather than pegged to the dollar — should,
therefore, ultimately prove beneficial. What’s
more, the dollar’s rate of appreciation has
been slowing. A more stable dollar in the
not-too-distant future could help stabilize
commodity prices (which are typically priced
in dollars), possibly laying the groundwork
for a turnaround for many developing country
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