Market decline triggers a wave of foreign currency intervention in Asian countries
After the start of the fight against inflation in the U.S. six months ago, when the Federal Reserve began raising the cost of borrowing, authorities in many Asian countries were also forced to carry out foreign currency intervention and increase their efforts to prevent their own currencies from falling, Bloomberg wrote.
One of the first such countries in Asia was South Korea, whose central bank spent currency intervention, saying it will buy sovereign debt of up to $2.1 billion.
Taiwan officials also took their own measures, introducing a countervailing currency intervention and declaring their readiness to ban short sales of stocks. China instructed a lot of funds to refrain from large sales of shares, and banks – to make sure the “observance” of the daily yuan rate in the market. Thus, the Japanese yen remains close to 145 per $1, and the yuan has reached its lowest level since 2008.
The rapid growth of the dollar to the detriment of all other assets is particularly acute in the Asian market. Central banks in Indonesia, Japan and India have also undertaken countervailing currency interventions to support their currencies, but their efforts seem insufficient.
“Foreign currency intervention will only help slow the decline in Asian assets, not stop it,” said Mitul Kotecha, head of emerging markets strategy at TD Securities in Singapore. – U.S. rate hikes, a stronger dollar and relatively low real rates in the region suggest the pressure will continue in the coming weeks.”
Some exception to the rule was South Korea, where the authorities’ intervention was relatively more successful as 3-year bonds rose after the central bank said it would buy government debt.
Earlier, we reported that the number of detected COVID-19 cases in the world exceeded 616.6 million.
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Investors gravitate toward bear market after Fed decision
The consensus among investors is that the U.S. Federal Reserve will raise rates again before the end of the year and will not loosen its monetary policy until 2024, which is a bearish outlook for the stock market. So it’s important to be prepared for a drop in the S&P 500 and other indices.
That’s the prevailing view of about 350 respondents to the Instant MLIV Pulse survey after Wednesday’s Federal Open Market Committee meeting.
The findings contrast with the interest rate swap market, which is still struggling to gauge a rate cut this year. More than 70% of MLIV Pulse respondents said the Fed is not done raising rates yet. More than half said they expect the central bank to wait with its policy easing until next year.
The survey results are in line with Fed officials, but go against traders who estimated this year’s rate cut has led to lower Treasury yields.
Swap markets expect the Fed rate to peak at around 4.95% in May and then fall to about 4.2% in December.
Earlier we reported that the U.S. Department of Justice has begun investigating the collapse of Silicon Valley Bank.
Startups under threat worldwide after Silicon Valley Bank collapse
High-tech startups have been hit. Companies around the world are facing a fight for survival after the collapse of a major US investment bank, Silicon Valley Bank (SVB). There was a “huge disruption” in the industry globally, Bloomberg reported, citing market participants. The entire stock market, and the S&P 500 in particular, plummeted.
Startups under threat
The bankruptcy of the lending institution, in particular, affected the co-founder of startup Birdly Inc. Quang Hoang. The entrepreneur invested about $10 million in SVB and is still unable to repay the money four days after the bank was shut down by the California Department of Financial Protection and Innovation. However, the entrepreneur is far from the only one who has faced similar problems, the article specifies.
“Hoang was one of thousands of founders around the world this week trying to track down their money after days of chaos and who are completely rethinking the way they run their own businesses. Startups from Silicon Valley to London to Tel Aviv to tech hubs across Africa have depended on SVB as a one-stop store for everything from storing their fortunes to personal mortgages,” the story says.
Now investors and technology companies are predicting a complicated financial future for themselves, even if the bankrupt bank begins to attract deposits from customers under a new name. Many market participants faced a “financial payback” for their overreliance on the credit institution’s risky investment assets, the memo said.
On March 11, the California Department of Financial Protection and Innovation closed Silicon Valley Bank, a large investment bank based in Santa Clara County. All insured deposits from SVB were transferred to Deposit Insurance National Bank of Santa Clara. Depositors were expected to have access to their accounts by March 13.
Earlier we reported that the U.S. Department of Justice has begun an investigation into the circumstances of the collapse of Silicon Valley Bank.
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