Asian currencies in turmoil | Financial Times

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The widening chasm in interest rate policies around the world has sparked turmoil in Asian currency markets. The yen plunged to its lowest level in 24 years against the dollar as hedge funds in Europe and the US resumed bets that the Bank of Japan’s ultra-loose monetary policy would continue.

Japan’s currency declined to ¥144 against the dollar, its weakest level since August 1998. The sell-off began yesterday and continued today, leaving it down a fifth in value this year despite a shift in tone from the Japanese government, which threatened to intervene if the currency’s value fell further.

The storm had been seen coming in recent weeks as the worsening economic outlook for the US economy pushed Federal Reserve officials to hint at multiple aggressive rate rises in the US in months to come. It may have even been exacerbated by the Japanese government’s decision to lift Covid travel restrictions, fuelling yen outflows by Japanese tourists visiting other countries.

South Korea’s government was also talking tough today to stem a run on the country’s currency, which fell for a fifth consecutive session to hit its weakest level since the 2009 global financial crisis. The cause here was a combination of the US Federal Reserve’s aggressive monetary tightening and South Korea’s ballooning trade deficits.

Interest rates will be in the news again tomorrow when the European Central Bank’s rate-setting governing council gathers to decide how much to tighten monetary policy for the eurozone. Its members are widely expected to plump for a 0.75 percentage point rise this week, equalling the highest increase in the central bank’s 24-year life.

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Concerns arise. A forceful ECB rate rise may fail to curb market tensions given the different economic factors impacting Europe, other than inflation, FT European comment editor Tony Barber notes.

Interest rates are also in the news in the UK with new prime minister Liz Truss set for a policy clash with the Bank of England’s monetary policy committee, according to FT economics editor Chris Giles.

An early indication of this came today when the BoE chief economist told a Treasury select committee that plans by Truss for a freeze in energy bills for households and businesses was likely to force the central bank to raise interest rates despite bringing down the inflation rate in coming months.

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Some good news . . .

We live in remarkable times for medical breakthroughs, as the rapid development of Covid vaccines has proved, and this is true for endangered animal species as well as humans. Lucas, a prominent member of the San Diego Zoo’s African penguin colony, has been given a new lease of life with a pair of orthopaedic boots to allay a degenerative foot condition known as bumblefoot.