Tag Archives: Currency

China buying up large amounts of gold: Experts concerned Russia and Beijing currency could challenge the dollar

Revelations 6:3-4 “when he opened the second seal, I heard the second living creature say, “Come!” 4 And out came another horse, bright red. Its rider was permitted to take peace from the earth, so that people should slay one another, and he was given a great sword.

Important Takeaways:

  • Russia, China may be preparing new gold-backed currency, but expert assures US dollar ‘safest’ currency today
  • China and Russia may be working toward a new gold-backed currency in a move that would aim to dethrone the dollar as the primary reserve currency of the world, but any such currency would unlikely achieve that goal.
  • Neither country has officially confirmed plans for such a currency, but China earlier this year started to buy up huge quantities of gold at the same time that Russia was forced off the dollar due to sanctions in response to the invasion of Ukraine. The war also led to the steepest discount on gold prices in years.
  • “Two components in that strategy center around the development of a Yuan-based global commodities trading system and efforts by China, in partnership with Russia and other like-minded countries, to challenge dollar dominance by creating a new reserve currency,” Singleton told Fox News Digital.
  • Francis Hunt, a trading expert, told Asia Markets that using gold to back the currency would be the best way to build confidence in said currency, and that currency may be digital in nature to give China a greater scrutiny over its citizens’ activity.

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Myanmar currency drops 60% in weeks as economy tanks since February coup

(Reuters) – Myanmar’s currency has lost more than 60% of its value since the beginning of September, driving up food and fuel prices in an economy that has tanked since a military coup eight months ago.

Many gold shops and money exchanges closed on Wednesday due to the turmoil, while the kyat’s dive trended on social media with comments ranging from stark warnings to efforts to find some humor as yet another crisis hits the strife-torn nation.

“This will rattle the generals as they are quite obsessed with the kyat rate as a broader barometer of the economy, and therefore a reflection on them,” Richard Horsey, a Myanmar expert at the International Crisis Group, said.

In August, the Central Bank of Myanmar tried tethering the kyat 0.8% either side of its reference rate against the dollar, but gave up on Sept. 10 as pressure on the exchange rate mounted.

The shortage of dollars has become so bad that some money changers have pulled down their shutters.

“Due to the currency price instability at the moment…all Northern Breeze Exchange Service branches are temporarily closed,” the money changer said on Facebook.

Those still operating were quoting a rate of 2,700 kyat per dollar on Tuesday, compared to 1,695 on Sept. 1 and 1,395 back on Feb. 1 when the military overthrew a democratically elected government led by Nobel Laureate Aung San Suu Kyi.

WORLD BANK WARNS ECONOMY TO SLUMP 18%

The World Bank predicted on Monday the economy would slump 18% this year and said Myanmar would see the biggest contraction in employment in the region and the number of poor would rise.

The increasing economic pressures come amid signs of an upsurge in bloodshed, as armed militias have become bolder in clashes with the army after months of protests and strikes by opponents of the junta.

“The worse the political situation is, the worse the currency rate will be,” said a senior executive at a Myanmar bank, who declined to be identified.

Myanmar is also struggling to deal with a second wave of coronavirus infections that started in June with the response by authorities crippled after many health workers joined protests. Reported cases have comes off their highs though the true extent of the outbreak remains unclear.

In the immediate months after the Feb. 1 coup, many people queued up to withdraw savings from banks and some bought gold, but a jewelry merchant in Yangon said many desperate people were now trying to sell their gold.

The central bank gave no reason to why it abandoned its managed float strategy earlier this month, but analysts believe its foreign currency reserves must be seriously depleted.

Central bank officials did not answer calls seeking comment, but World Bank data shows it had just $7.67 billion in reserves at the end of 2020.

After coming off its managed float, the central bank still spent $65 million, buying kyat at a rate of 1,750 to 1,755 per dollar between Sept. 13-27.

The bank executive said the central bank’s efforts had limited impact in a currency market shorn of confidence.

The economic crisis has driven up the price of staples, and the UN Office for the Coordination of Humanitarian Affairs said this week that around three million people now require humanitarian assistance in Myanmar, up from one million before the coup.

In a country where gross domestic product per capita was just $1,400 last year, a 48-kg bag of rice now costs 48,000 kyat, or around $18, up nearly 40% since the coup, while gasoline prices have nearly doubled to 1,445 kyat per liter.

“If you have money, you buy gold, you buy dollars, you buy (Thai) baht. If you do not have money, you will starve,” said Facebook user Win Myint in a post.

(Reporting by Reuters Staff; Writing by Ed Davies; Editing by Simon Cameron-Moore and Nick Macfie)

Brawls in shops as Lebanon’s financial meltdown hits supply of food

By Maha El Dahan and Ellen Francis

BEIRUT (Reuters) – The collapse of Lebanon’s currency has forced many grocery shops to temporarily shut within the last 24 hours, raising fears that a country reliant on imports could soon face shortages of food.

Food shops around the country were locking their doors, halting online deliveries or restricting customers’ orders. Others stayed open, but could not say for how long.

“There’s a big possibility we will close if it stays like this. I don’t know where will we get supplies, and no one is helping us,” said Beirut grocer Mohieldin Fayed, who has kept his shop open.

The pound tumbled to 15,000 to the dollar on Tuesday, losing a third of its value in the last two weeks. It has now sunk by 90% since late 2019.

“If this persists, things will start to disappear, traders will prioritize what to get,” said Hani Bohsali, head of the foodstuffs importers syndicate. “We’ll have to buy less, in variety and quantity, because we can’t find the money.”

He estimated the country has roughly two months of supplies, while it was getting more and more difficult for importers to obtain the dollars they need to keep buying.

The economy’s collapse has pushed much of the population into poverty and poses the biggest threat to stability since the 1975-1990 civil war.

Social media users have been sharing videos of supermarket brawls, such as a fight between a man and a woman trying to buy powdered milk. Prices of many consumer goods such as diapers or cereals have nearly tripled during the crisis.

Nabil Fahed, head of the syndicate of supermarket owners, said some of the shops that had shut on Tuesday reopened on Wednesday after replenishing stocks. But he said permanent closures would happen if no exchange stability was reached.

“What we’re afraid of is that these eventually turn from temporary closures … that it becomes final because it is a dire situation, their capital is being eroded and they don’t have money to pay for goods.”

The vice president of Lebanon’s bakeries’ syndicate said bakeries were supplying the country with bread for now, but could not do so indefinitely without a solution. Lebanon imports almost all of its wheat.

“If we continue at this pace, in the end we will reach a forced closure until the exchange rate stabilizes,” Ali Ibrahim, who tried to resign from his position two weeks ago because of the dire situation, said in a statement.

LOOMING SUBSIDY REMOVAL

Many shops in Lebanon were already shut because of the coronavirus pandemic, and streets have also been closed by roadblocks during anti-government demonstrations. But until this week, groceries had mostly stayed open. Many have been offering deliveries online.

On Tuesday, a number of online grocery shops disappeared from apps. Others refused to accept orders.

Lebanon’s central bank has drawn on already critical foreign reserves to subsidize three key commodities – wheat, fuel and medicine – and a basket of other basic goods, as dollars inflows dried up. It has provided hard currency to importers at the old peg of 1,500 Lebanese pounds to the dollar.

But the state, fast running out of cash, has signaled multiple times that the subsidies would soon be lifted, although it has yet to give a timeline or announce a plan.

Supermarket syndicate head Fahed said the central bank was often slow to release dollars to food importers, causing shortages which in turn provoke consumers to hoard goods. In one example, he said a supermarket had sold a typical month’s stock of 5,000 gallons of subsidized cooking oil in only five hours.

The looming removal of subsidies has triggered fears of shortages, said Nasser Saidi, an economist and former cabinet minister.

“As soon as you announce that subsidies might be lifted or reduced…automatically consumers hoard goods,” he said.

(Reporting By Maha El Dahan, Ellen Francis, Imad Creidi and Alaa Kanaan; Writing by Maha El Dahan; Editing by Peter Graff)

U.S. revives sanctions to further damage Iran’s economy

FILE PHOTO: A man walks past an anti-U.S. mural in Tehran, Iran October 13, 2017. Nazanin Tabatabaee Yazdi/TIMA via REUTERS

By Lesley Wroughton

WASHINGTON (Reuters) – The Trump administration expects economic sanctions that it is re-imposing on Iran this week to further cripple the Iranian economy and will aggressively enforce the measures, senior U.S. administration officials said on Monday.

The so-called snapback sanctions, due to come into force early on Tuesday, would target Iranian purchases of U.S. dollars, metals trading and other dealings, coal, industrial-related software and its auto sector.

Iran’s rial currency has lost half its value since April under the threat of revived U.S. sanctions. The plunge in the currency and soaring inflation have sparked sporadic demonstrations in Iran against profiteering and corruption, with many protesters chanting anti-government slogans.

President Donald Trump is aiming to cut off the Iranian leadership’s access to resources, the officials said. The United States also plans to re-introduce potentially more damaging sanctions on Iranian oil in November.

But the U.S. sanctions strategy has several weak spots, especially a reluctance by Europe and China to curtail business with Iran.

The European Union voiced regret on Monday at the looming U.S. sanctions.

Trump warned on Monday of “severe consequences” for people or entities that fail to wind down economic activities with Iran.

“The United States is fully committed to enforcing all of our sanctions, and we will work closely with nations conducting business with Iran to ensure complete compliance,” he said in a statement.

If Iran wants to avoid the reimposition of sanctions it should take up Trump’s offer to negotiate, White House national security adviser John Bolton said on Monday.

Asked on Fox News what Iran’s leaders could do, Bolton said: “They could take up the president’s offer to negotiate with them, to give up their ballistic missile and nuclear weapons programs fully and really verifiably not under the onerous terms of the Iran nuclear deal, which really are not satisfactory.”

“If Iran were really serious they’d come to the table. We’ll find out whether they are or not.”

The sanctions now being brought back were among those lifted under the 2015 deal between world powers and Tehran on curbing Iran’s nuclear program.

Foes for decades, the United States and Iran have been increasingly at odds over Iran’s growing political and military influence in the Middle East since Trump took office in January 2017.

Trump announced this May he would withdraw the United States from the Iran nuclear deal.

Iranian Foreign Minister Mohammad Javad Zarif said on Monday that Trump and U.S. allies Israel and Saudi Arabia have become isolated by their hostile policies toward Tehran, state TV reported.

“Their oppressive policies and violent measures have made them isolated … The world has distanced itself from their hostile policies against Iran,” Zarif was quoted as saying.

The sanctions aim to modify Iran’s behavior and not bring about a “regime change” targeting President Hassan Rouhani, the U.S. officials said. They said the Iranian government’s handling of social and labor protests was a concern.

EUROPE WORRIED

The European Union expressed concern at the new U.S. move.

“We deeply regret the re-imposition of sanctions by the U.S.,” the bloc said in a joint statement with the foreign ministers of France, Germany, and Britain.

One EU measure to mitigate the impact of U.S. sanctions, known as the blocking statute, will come into force on Tuesday.

One U.S. official said the administration was deeply concerned about reports of Iran’s violence against unarmed citizens. “The United States supports the Iranian people’s right to peacefully protest against corruption and oppression without fear of reprisal,” the official added.

The U.S. officials added that Trump was ready to meet with Iran’s leaders at any time to try to forge a new agreement.

Trump “will meet with the Iranian leadership at any time to discuss a real comprehensive deal that will contain their regional ambitions, will end their malign behavior and deny them any path to a nuclear weapon,” one official said.

Asked about possible exemptions to the sanctions, officials said they would examine any requests on a case-by-case basis.

(Reporting by Lesley Wroughton and Lisa Lambert in Washington and Robert-Jan Bartunek and Alissa de Carbonnel in Brussels; Writing by Alistair Bell; Editing by Howard Goller and James Dalgleish)

Egyptian Foreign Currency Reserves Dive In January

Egypt’s foreign currency reserves took a major hit in January falling 10%.

Egypt’s central bank said that reserves fell $1.4 billion during the month as political unrest and violent protests start to have a major impact on the government’s ability to collect funds. The dip raises significant concerns about the stability of the Muslim Brotherhood-led government. Continue reading →

UK Recession Deepens

The recession in the UK officially deepened after reports of the country’s gross national product falling .7% between April and June. The fall was more than double the .3% drop in the first three months of 2012.

The fall marks the fourth negative quarter in five quarters for the UK with the latest the worst of the four declines. It’s the largest fall in GDP growth since a 1.6% fall in the first quarter of 2009. Continue reading →