Does a 50%+ overnight devaluation count as hyperinflation? We can't say for sure that it does but we do feel safe saying that after this week, many Malawians are less likely to be storing their life's savings in Malawian Kwachas. The official rate for the USDMWK cross jumped from 173 to 259 (50%) on Thursday and was up another 5% today.
Bear in mind this is the 'official rate'. As we've learned with
Syria and
Myanmar, the de facto rate tends to be much worse. The ripple effect from this latest round of turmoil in Europe is creating all kinds of stress in the currency markets. Many USD-based currency crosses have, or are on the verge of, breaching recent highs.
For the chart we picked out just a few of the crosses that came to our attention (there are several others in the same boat) and note that three of them belong to large BRIC economies.
Yesterday we talked about the recent drop in crude oil prices but with the behavior exhibited in the above chart, that drop is being offset with weakening currencies creating very little net benefit.
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