Financial Technology

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.

Column chart of Annual % change against US dollar showing Japan's yen in historic drop

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.

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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Need to know: the economy

China’s exports significantly missed expectations in August, as overseas demand flattened and the wave of Covid-19 lockdowns across the country disrupted domestic production and logistics. The figures were doubly disappointing because trade had been one of the few economic bright spots for the world’s second-largest economy.

Latest for the UK and Europe

Europe’s metals industry bosses have warned of an “existential threat” to the sector’s future if the EU does not step in with emergency measures. An aluminium smelter in Slovakia and a zinc plant in the Netherlands have already halted production indefinitely with the threat of more closures to follow, according to Eurometaux, the nonferrous metals trade body.

The long resilient UK housing market is showing signs of a slowdown as interest rate rises and inflation bite. London housebuilder Berkeley Group said this week that it is taking a more cautious approach to buying land with expectations of a property downturn growing.

The country’s largest housebuilder Barratt Developments still expects house prices to grow, but more moderately, according to its annual results statement today. FT columnist Helen Thomas is more pessimistic, warning that with the era of rock bottom interest rates and government support for buyers over the housing market is now on shaky ground.

Global latest

California’s governor Gavin Newsom has warned businesses and households to prepare for a second wave of blackouts in two years amid the US state’s record-breaking heatwave. California’s grid operator placed the state on its highest alert setting, prompting San Francisco-based Pacific Gas and Electric to warn about 525,000 customers to prepare for potential rolling power outages.

Argentina wants to help ease global food and energy shortages by raising oil and gas production and incentivising exports of grain from the country, economy minister Sergio Massa told the FT’s Michael Stott. The comments, made on the first day of a visit to the US, will be welcomed by the White House, which needs friendly nations that can alleviate food shortages created by the Russian invasion of Ukraine. Argentina, for all its economic and political problems, is a natural resources powerhouse.

Need to know: business

Spain’s biggest oil company Repsol has taken an innovative route to helping cut carbon levels by selling a 25 per cent stake in its exploration and production business in order to fund renewable investments. Repsol said the deal, which values its upstream business at about $19bn, would “crystallise value” in the division while freeing up capital for greater investments in greener forms of energy.

Revolut has taken cost cutting to a new level by pulling graduate job offers just days before the successful candidates were due to start work with the financial technology company. Fintechs have had to make significant cuts to counter the impact of the economic downturn and interest rate rises, with investors now far less willing to bankroll growth without profits. At least Revolut hire received a work laptop before being told their offer had been revoked.

Ocado Retail has appointed Hannah Gibson as its new chief executive as the pandemic-fuelled boom in online grocery shopping fades, an additional challenge as she seeks to meet the company’s growth ambitions amid a cost of living crisis when consumers are tightening their belts.

Elon Musk has added world war three to his list of excuses for pulling back from his $44bn takeover of Twitter. The claim was made in texts between the billionaire entrepreneur and his bankers revealed in a court hearing.

The World of Work

One of the bright spots of 2022 has been the jobs market, which remains buoyant for those seeking employment. How long that will last is uncertain; however there are good indications that business school graduates will be in demand for some time to come, according to the FT’s report on Masters in Management degree courses.

Getting the most out of hybrid workers, balancing time spent in the office with working at home, is the greatest management challenge of this moment, according to Stefan Stern, author of ‘How to Be a Better Leader’ and visiting professor at Bayes Business School, City, University of London.

Covid cases and vaccinations

Total global cases: 599.5mn

Total doses given: 12.6bn

Get the latest worldwide picture with our vaccine tracker

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.

A penguin wearing a custom orthopaedic boot
Lucas, the African penguin, shows off his new footwear to his keepers © San Diego Zoo

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