Trump Power Deflating Asian Currencies
Date
1/10/2025 12:02:27 AM
(MENAFN- Asia Times)
The US dollar's sharp appreciation after President-elect Donald Trump's election win is hitting Asian currencies, with the Chinese yuan, Japanese yen, Indian rupee and Korean won now all plumbing multi-year lows .
That's raising significant concerns about imported inflation and the challenges higher-priced goods will pose to regional governments and central banks' economic and monetary policymaking.
For Asian economies, where the US is a key trade partner and many commodities-notably oil-are priced in dollars, a weaker local currency inflates the cost of imports. This imported inflation trickles down to consumer prices, raising the cost of living and eroding purchasing power.
In China, a depreciating yuan exacerbates inflationary pressures on key imports such as semiconductors and agricultural products, which are critical to its manufacturing sector and food supply chain.
Similarly, in South Korea , the won's depreciation not only raises the cost of imported energy and raw materials but also threatens to erode the profitability of export-oriented industries, as higher production costs offset the competitive advantage of a weaker currency.
A key concern for policymakers is how currency-induced inflation can spiral.
When businesses and consumers anticipate that prices will continue to rise, they often adjust their behavior-companies may increase prices preemptively, while households might accelerate purchases anticipating higher future prices.
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