Pacific Exchange Rates Report for November 25th – December 6th
By: Gabriel Kukulka, The Quinnipiac University Economics Research Team
Pacific Currencies Index
Source: Yahoo Finance and own calculations. Exchange rates are inverted to be USD per local currency (i.e., an increase indicates a stronger domestic currency) and then indexed to be 100 at the start of the period.
Between November 25th and December 6th, three of the tracked Pacific exchange rates increased, while one decreased. The Japanese yen (maroon) steadily declined over the two-week period, ending down 2.3%. In contrast, the New Zealand dollar (blue) posted a modest gain of 0.2% by December 6th. The South Korean won (red) showed a more significant increase, rising 1.4%, while the Australian dollar (green) recorded the largest gain, climbing 1.6%.
Pacific Historical Trends
Source: Yahoo Finance and own calculations. Exchange rates are inverted to be USD per local currency (i.e., an increase indicates a stronger domestic currency). The center line is a rolling three-month average. The upper and lower boundaries are the average plus and average minus one standard deviation, respectively, for the same three-month period.
As December begins, there are notable developments in the four tracked Pacific exchange rates. The Australian dollar has been weakening against the USD since early October, a trend that continues as the currency now exceeds the upper boundary of its three-month rolling average. Similarly, the South Korean won, and the New Zealand dollar have followed a comparable path, with both currencies weakening further this past week to also surpass their three-month rolling averages' upper boundaries. In contrast, the Japanese yen remains the only Pacific currency strengthening against the USD as it continued to fall back towards the centerline this week.
Further Reading
Following the declaration of martial law by South Korean President Yoon Suk Yeol this past week, the attached article describes how the Bank of Korea (BOK) and other institutions took swift action to provide unlimited liquidity and stabilize the won quickly, despite potential political upheaval. By deploying market stabilizing funds, the BOK was able to reassure foreign investors that damage would be limited. South Korea’s slowing growth and labor strikes already had authorities on high alert, but declaration of martial law was not planned for. With the martial law becoming invalid shortly after, the response worked, and Korea’s stock market only fell by 2.5% over a three day period. Had martial law been in place longer, the reactions from investors could have been more severe, but it is clear the BOK’s actions were effective in the short-term.
Comments