April currency review

A sudden devaluation of the Chinese yuan renminbi in late April, with the currency falling nearly 4% against the US dollar, sent shudders through financial markets. Traders were instantly reminded of the huge economic fallout when similar devaluations were engineered by Chinese authorities in 2015 and 2016, and which prompted considerable capital flight. However, while the yuan's depreciation certainly relates to what are difficult economic circumstances for China, given among other things its self-imposed isolation through strict Covid-induced lockdowns in Shanghai, Hong Kong and possibly now Beijing, the country also learnt from those previous experiences and has become much better at using capital controls and liquidity management to prevent too much money fleeing the country. The recent devaluation is unlikely to be the start of any major decline in the yuan's value, therefore.

Sri Lanka defaulted on its foreign debt in April, an unsurprising move given the state of collapse in its economy, but one which nevertheless caused its currency to fall a further 12% against a weak euro. This comes on top of a 31% devaluation in March.

Syria also devalued its currency in April. 

Numerous currencies made significant gains against the euro in April (see next table). The single currency lost ground due to the European Central Bank's doveish stance on raising interest rates to fight inflation compared to many of its peers in other developed economies.

The rebound of the Russian rouble, following heavy falls in February after the Ukraine invasion, continued notably in April. Soaring oil and gas prices, and Russia's ability to carry on selling energy to China and others, despite international sanctions, were telling.

In other currency news, new regulations in Myanmar mean that all foreign currency being paid or transferred into banks in the country must immediately be converted into kyat at the official exchange rate, which is currently overvalued by about 8% compared to fairer-value rates available on the black market.

Central African Republic has become the world's second country to adopt Bitcoin as legal tender. The same move in El Salvador last year has since produced only a low adoption rate for Bitcoin among local nationals, but has not caused the serious problems many predicted and has undeniably increased worldwide attention for El Salvador. 

Finally, here is this month's selected currency movements table: