These 3 (European) Countries risk a Currency Crisis

22 November 2022 - 12:59

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Is the currency crisis about to explode in Europe? Outside the euro, at least 3 nations are at risk of currency collapse, joining other countries around the world that are already on the verge of collapse.

These 3 (European) Countries risk a Currency Crisis

Currency crisis coming in 2023, also in Europe?

Due to the increase in fiscal challenges and coming from external factors, according to the experts of Nomura Holdings not even the old continent will be immune from the danger of the collapse of exchange rates. Considering, in fact, the countries that do not adopt the euro, there are at least 3 indicated at risk.

It would be a further factor of financial instability for next year, for which a recession is already forecast.

Which states, even in Europe, risk the collapse of currencies? An analysis.

Currency collapse: there is a risk in 3 European countries

Czech Republic, Romania and Hungary face the risk of an exchange rate crisis next year, Nomura’s latest warning.

The alert is based on an analysis of eight indicators, including foreign exchange reserve coverage for imports, short-term real interest rates, as well as fiscal and current account measures, according to Nomura’s Damocles Index which has assessed the vulnerability of 32 emerging markets to a currency crisis.

Furthermore, Egypt, Sri Lanka, Turkey and Pakistan are not yet out of the woods, Nomura analysts Rob Subbaraman and Si Ying Toh wrote in a report.

The Hungarian Forint is among the worst performing emerging market currencies this year after a freeze on recovery funding by the European Union. The currencies of Romania and the Czech Republic also fell by more than 8% against the dollar.

The vulnerability of emerging market currencies is now at its highest in more than two decades and provides an “ominous warning” of growing risks on a massive scale, the report said.

It should also be noted that foreign exchange markets have experienced major shocks in 2022 and in some countries, a combination of geopolitical pressures and central bank missteps have pushed currencies into a "death spiral".

A stronger dollar over the year, with investors flocking to the safe-haven currency amid the deluge of geopolitical and macroeconomic shocks, weighed on many emerging market currencies.

Major oil producers and countries with central banks that have raised interest rates sharply are generally doing better, but some states have even seen the value of the currency against the dollar fall by 75%.

The 3 Worst Currencies of 2022

Steve Hanke, a professor of applied economics at Johns Hopkins University, publishes a regular list of the year’s worst-performing currencies, and the Ghanaian cedi is third in the 2022 rankings.

This was reported by an analysis by CNBC a week ago. Ghana’s problems include rising cost of living and an unsustainable debt burden that have forced the government to turn to the International Monetary Fund for assistance, according to this report.

The cedi’s decline makes it only the third worst-performing currency in the world this year.

In second place is the Cuban peso, which is down 56.36% against the dollar, trailing only the Zimbabwe dollar, which has lost a staggering 76.74% of its value against the dollar since January. Both Zimbabwe and Cuba suffer from staggering levels of inflation.

National statistics agency ZimStat reported that the African country’s inflation reached 268% annually in October, but Hanke’s estimates put it at 417%. Similar to Ghana, Zimbabwean authorities have attempted to shore up the local currency and fight inflation by cracking down on payments in Zimbabwean dollars.

Sky-high inflation is also a central problem in Cuba, with Hanke’s model setting consumer price increases at 166% per year.

Original article published on Italy 2022-11-21 15:41:01.
Original title: In questi 3 Paesi (in Europa) si rischia una crisi valutaria

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