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- Jun Wang
- Posted Articles: 13
- Last Posted: 2017-07-20 09:09:43
Currency Movements and Global Wealth2017-03-01 09:01:15
Events in the global financial industry will definitely impact an investor’s portfolio. And any movement in the currency of reference can increase or decrease the wealth of a household. According to Credit Suisse Research Institute’s Global Wealth Report 2016, exchange rate movements have greatly affected the methodology of computing wealth for nations although such changes are remarkably restrained unlike in the previous years.
The study, which computed the wealth of certain countries by subtracting the amount of household debt from the total financial wealth and non-financial wealth held by household, sought to determine how currency fluctuations influenced the wealth of these nations.
China shocked the global financial markets when it depreciated the yuan’s value in August 2015. As a result, some Asian currencies spiralled. In the case of the Asian country, it wanted its economy to remain balanced and make its currency, the renminbi, one of the leading currencies worldwide. Although the worth of China’s wealth is lower (in terms of US dollars), the move led to the Chinese economy still recording a surge in wealth mainly backed by the boom of real estate market. Aside from that, assets net of debt increased to $23.3 trillion, up 2.1%. The report said China wiped out $680 billion because of currency devaluation and the contraction of market capitalization.
A relatively stable country, the research states that Japan is the second richest country in the world. The nation’s gross domestic product noted the divergence between its flat debt and wealth. Japan’s household wealth changed significantly as it escalated by $3.9 trillion, up 19% from a 17% drop a year ago. It is attributed to the Japanese yen’s ascension against the US dollar.
The Russian ruble declined more than 16% against the greenback. Depreciating currency and sanctions are two of the challenges currently faced by its dwindling economy. The former created a huge impact on its wealth since assets have lower value in dollar terms. It constricted the difference between resources and debt, as well as the country’s $1.1 trillion wealth, down 14% from the past year.
Brexit surprised the financial markets this year. Due to the United Kingdom’s move to leave the European Union, currencies and stock markets plummeted. The British pound tumbled more than 15% following the country. Plus, the report projects the nation erased $1.5 trillion of its household assets.