Tokyo, Japan – The Nikkei 225 index in Japan has shown remarkable performance this year by surpassing its previous record high set 34 years ago. While the local currency terms indicate a gain of 13.2 percent, the weakening of the Japanese yen against the US dollar has significantly impacted the returns for investors calculating their portfolios in dollars.
This trend is not unique to Japan, as currencies across various economies, both developed and emerging, have been sliding against the US dollar. Recent weeks have seen a further acceleration of this global currency devaluation, highlighting the impact of the strong dollar on international markets.
The US market’s expectation of sustained high interest rates has driven the value of the dollar upwards, leading to uncertainties about potential rate cuts by the Federal Reserve. The contrast between the forecasted higher interest rates in the US economy and slower growth rates in other countries, as indicated by the IMF, has intensified concerns about further currency devaluation beyond Japan and South Korea.
Reflecting on the financial crisis of 1997, when several Asian economies faced sharp devaluations and market turmoil, finance ministers are closely monitoring currency stability. The joint statement issued by Japan, South Korea, and the US acknowledges the need for restoring stability to prevent a recurrence of past crises in the region.
While current economic conditions are different from those in 1997, the potential for instability remains a concern. Central banks are working to maintain stability and prevent a repeat of past crises, emphasizing the importance of coordinated efforts to address currency devaluation challenges.
As international discussions continue on currency stability, market observers are closely watching Central banks’ response to address the ongoing currency devaluation trends and the potential impact on global markets. The evolving situation underscores the complex interplay between currency fluctuations, interest rates, and economic growth indicators.
