The Chinese yuan recently hit its lowest level in 10 years against the dollar, the euro dropped to a low not seen in 2 years last week and the British pound is at low not seen since the 1980s. Additionally, the Colombian peso have fallen to their lowest prices on record against the dollar, while Argentina has recently introduced capital controls after its peso plunged in August. Out of 41 currencies tracked by The Wall Street Journal, only nine are up against the dollar in 2019.
“People are becoming more concerned about currencies because currencies are becoming more dangerous,” said Kit Juckes, global strategist at Société Générale.
As rates around the world fall and bond yields lower, the U.S. becomes more attractive to international investors. One example of this is the payout on Treasurys which is far above that of many other government bonds. That shift has caused the dollar to rise up to historic highs against the currencies of many of U.S.'s trading partners.
Many countries are benefiting from cheaper currencies, which tend to make exporters’ products more competitive abroad and boost economic growth.
Mr. Juckes is advising clients to bet on the dollar and Japanese yen rising against a variety of emerging-market currencies, including the South African rand, Polish zloty and South Korean won.
China in early August allowed its yuan to drop below levels long thought to be never seen again, in response, the U.S. designated China a currency manipulator for the first time since 1994.
While Group of 20 nations have publicly stated that they will not allow currency to drop for competitive advantage in reality little is done to prevent currencies from dropping . 14 central banks cut rates last month, including Mexico, India and Hong Kong, a big jump from the 8 in July.
If the declines continue it could have a number of far-reaching effects.