March 4, 2014 (next update: March 18)

During February 2014, very fine calculations have been made in virtually every country in the world with regard to how each can let their currencies continue to fall against the US$ and Euro in order to squeeze out more economic growth, without pushing inflation above targets which are usually (not always) in the 2-3% range. One example of this has been Hungary, where the Central Bank of Hungary cut the central base rate of interest by what would ordinarily be considered a miniscule 0.15% in mid-February, to 2.7% – Hungary has inflation of 0% and an inflation target of 3%.. The Hungarian forint fell 6% on the month, more than other Eastern European currencies. Some countries have concluded that their currencies had already fallen enough in 2013 and that, with suggestions that the U.S. economic recovery may be stalling, corrections were in order. Against this backdrop, pockets of strength against the US$ in February included South Africa, Tunisia, Australia, New Zealand, India, Brazil, Paraguay and Guatemala. The Icelandic krone has risen 10% against the US$ since this time last year. The basic strength of the Euro against the US$ in 2013 continued in February 2014. The yen moved up slightly against the US$ in February, reversing a little of its 2013 decline.

The Ukraine and other former USSR countries: in the middle range of the depreciations of the Ukrainian hryvna (30% on the month against the US$) and the Russian rouble (10%) is the 20% decline against the US$ for the month of February of the Kazahkstan tenge. Media reports suggest that the large decline in the hryvna (formerly under a crawling peg) is intended to indicate to the world that the Ukraine is willing to accept the severe economic adjustments which will likely be demanded by the IMF in return for an IMF-led infusion of cash. At present, the IMF appears to be emerging, in the eyes of the Ukraine, as the key player in raising (from a variety of sources, including the EU) the amounts of foreign currency required by the Ukraine, estimated to be in the range of $35 billion for 2014 and 2015.

The Chinese yuan gave back, in February, most of its 1.5% year-long appreciation. On the authority of the China Foreign Exchange Trade Center (all terms as translated by the Bank of China), the Bank of China publishes each day, for the interbank foreign exchange market, rates against the yuan for the US$, Euro, Japanese yen, Hong Kong dollar, UK pound, Australian dollar, Canadian dollar, Malaysian ringitt and Russian ruble. The US$ per yuan anchor for these Reference Rates was pushed down in mid-February, and the weakness in the yuan was against the trend of steady strengthing it has exhibited for a number of years.