Thread by @TheFactFindr

#FX Should #INR be compared to the #EURO, #JPY and #GBP ?

Thanks for asking your question…

Common #Narrative that #INR has done well when compared to the #JPY, #GBP and #EURO. It’s a Entirely FLAWED Argument and many Global Macro guys must be laughing at our TV Experts.

WHY?

https://twitter.com/_Shelby_Co/status/1561711550876233730

Let’s look at JPY. This country runs a large current account/trade surplus. Yet it’s currency depreciates ? Why. COZ the central banks wants INFLATION. And it doing YCC at 0.25%. It will continue to do YCC (Print JPY) until inflation hits a respectable amount. But Japan is

Growing old. And Old Economies don’t witness inflation. Coz Old people don’t consumer new cars, consumer durables or new houses… so commodity demand falls and inflation falls. So to drive inflation, they print money. So the JPY depreciates vs it’s natural tendency to Appreciate

Let’s also take the EURO. The EU current account surplus was €350 billion in 2021 corresponding to 2.4 % of GDP. The EU current account surplus was €209 billion with the United Kingdom and the deficit €125 billion with China in 2021. In 2022, that changed. Monthly CA of Europe

Considering 2022 Q2, the Euro Area recorded a current account gap of EUR 20.1 billion, compared to a EUR 1 billion surplus in Q1 2022.

And despite that it’s Currency has been depreciating ? Why ? Coz there is No growth and ECB has to print more money.

Now let’s look at China #CNY. They also had a Current Account Surplus. But yet unlike JPY and EURO, the CNY has barely depreciated. Let’s look at the last 10yrs. There has been volatility but overall almost ZERO depreciation vs the USD.

Why ? China has growth & hence Inflation.

If you liked the thread, kindly RETWEET IT

https://twitter.com/thefactfindr/status/1561724482787614721

Given how the DXY has rallied, I thought it would be wise to have a look at why the USD is so important in the context of leverage. Very Handy THREAD

https://twitter.com/fintwitnotes/status/1553381596538892290