The South Korean won plunged to its weakest level in 15 years on Thursday, reflecting heightened economic and political risks.
The currency was trading at 1,449.9 per dollar in early onshore trade, down 0.96% from the previous session.
This marks the lowest level for the won since March 2009.
The drop comes after the US Federal Reserve adopted a cautious approach to future interest rate cuts, coupled with domestic instability stemming from President Yoon Suk Yeol’s controversial martial law order earlier this month.
The won has now weakened 11% year-to-date, making it the worst-performing Asian currency of 2024.
US Fed’s hawkish stance adds pressure
On Wednesday, the US Federal Reserve cut interest rates as widely anticipated, but Chair Jerome Powell’s remarks signalled that further cuts would depend on sustained progress in controlling inflation.
This hawkish stance boosted the dollar, exacerbating the won’s decline.
The dollar index, which measures the US currency against six major currencies, climbed to a two-year high of 108.086, up 0.05%, reaching its highest level since November 2022.
The South Korean central bank has flagged significant downside risks to the country’s economic growth, compounding the pressure on its currency.
The Bank of Korea has cited the lingering economic effects of the Dec. 3 martial law order, warning that the nation’s growth forecasts for 2024 and 2025 could face substantial downward revisions.
The won’s decline extends its losses for a third consecutive month, dropping 3.9% against the dollar in December.
Political instability undermines investor confidence
South Korea’s political landscape has further dampened investor sentiment.
President Yoon’s brief imposition of martial law earlier this month has raised concerns over governance and stability.
This political uncertainty has contributed to a 2% drop in the benchmark KOSPI index, driven by foreign investors offloading South Korean equities.
In response to the market volatility, South Korea’s finance minister pledged swift and decisive interventions if fluctuations in financial markets were deemed excessive.
Measures under consideration include stabilisation policies aimed at containing foreign exchange volatility.
Despite assurances from policymakers, the won has remained under intense pressure.
Market participants suggest that authorities may be attempting to defend the 1,450 level, making it challenging for traders to bet against the currency.
South Korea’s financial regulator has instructed local banks to manage foreign exchange transactions and loans flexibly to mitigate market stress.
Year-to-date performance marks a dismal outlook for the won
The won’s performance in 2024 has been its worst since the global financial crisis of 2008.
Its year-to-date decline of 11% highlights the currency’s vulnerability to external shocks and domestic challenges.
Analysts predict that sustained pressure from a strong US dollar and political instability could further weigh on the currency in the coming months.
The downturn in the won has also reverberated through South Korea’s equity markets.
The KOSPI index fell 2% on Thursday, with foreign investors pulling out of local shares.
This marks a continuation of a bearish trend in South Korean stocks, driven by concerns over economic slowdown and governance issues.
An internal email sent by the HR manager of an Indian startup, YesMadam, surfaced on LinkedIn, sparking widespread outrage over its content, which suggested that employees experiencing workplace stress had been laid off.
The controversial email quickly propels the company—previously relatively unknown beyond metros—into the spotlight, albeit for all the wrong reasons.
The following day, the company issued a clarification, revealing that the email was part of a staged campaign designed to promote awareness about corporate wellness and employee well-being, as well as to introduce a program to help employees “de-stress”.
No employees were terminated, the company claimed.
If the projected act was not enough to cause infuriation, the truth did the trick.
YesMadam, a home salon services provider, found itself at the center of intense scrutiny for its questionable approach to highlighting workplace stress and mental health.
Though the uproar has since settled, it has reignited conversations about brand ethics, corporate wellness, and the fine line between awareness campaigns and insensitive marketing tactics.
What happened at YesMadam?
The controversy erupted when Anushka Dutta, a copywriter at YesMadam, shared a screenshot of an email purportedly sent by the company’s HR department.
The email claimed that following a workplace stress survey, over 100 employees who reported significant stress levels were terminated.
Dutta’s LinkedIn post, expressing disbelief at the decision, read:
What’s happening at YesMadam? First, you conduct a random survey and then fire us overnight because we’re feeling stressed? And not just me—100 other people have been fired too!
Her post gained instant traction, with netizens and industry professionals condemning the startup for its insensitivity.
Shitiz Dogra, Associate Director of Digital Marketing at IndiGo, captured the general sentiment:
Can an organization fire you for being stressed? Looks like it just happened at a startup—YesMadam…terribly stressful and disturbing news
(How YesMadam has trended on Google searches in the last 30 days)
The truth behind the layoffs
Amid mounting backlash, YesMadam issued a statement the following day, clarifying that the email was part of a staged campaign to promote a corporate wellness initiative called Happy 2 Heal.
The company explained that no employees were fired and that the screenshot was fabricated to draw attention to workplace stress and the importance of employee mental health.
YesMadam announced several wellness measures, including a new de-stress leave policy offering six additional paid leaves annually for mental health and on-site spa sessions to help employees unwind.
Dutta also updated her LinkedIn post, revealing that she was part of the campaign’s planning team:
“Yes, the survey did happen, in fact, I volunteered in the survey and was part of the core team which gave birth to the idea of De-Stress Leaves. Moreover, the employees were taken into confidence, and we didn’t send any emails, the screenshot which went viral was a planned move,” she said.
However, the revelation that the campaign was staged only deepened public outrage.
Critics slammed the company for trivializing layoffs—a harsh reality for millions of employees globally—just to promote a wellness initiative.
“It’s astonishingly ironic that a campaign claiming to address workplace stress chose mass layoffs—the most stressful and traumatic experience for any professional—as a shock tactic,” Aparna Mukherjee, head of communication branding and strategic content at Moe’s Art, a Mumbai-based communications agency, told Invezz.
“Layoffs are not just a word or an event; they represent financial uncertainty, emotional distress, and a loss of identity for many,” she said, adding,
By fabricating such a scenario, the campaign trivializes the very real struggles of those who’ve been affected, making their pain feel like a punchline. This isn’t awareness; it’s emotional exploitation, dangerously close to false advertising.
A couple of days later, Mayank Arya, co-founder and CEO of the company issued an impassioned video statement over the episode.
He apologized for the “miscommunication”. However, he stated that through this miscommunicated campaign a “start has been made” around the promotion of mental wellness at work.
“Go ahead…slap us if you want,” he said. “This communication went wrong… but my intentions were right.”
A pattern of shock advertising
The YesMadam episode drew comparisons to other controversial marketing campaigns.
Earlier this year, Indian actress Poonam Pandey staged her death in a campaign to raise awareness about cervical cancer.
The stunt, orchestrated by the digital agency Schbang, faced backlash for being overly dramatic and insensitive, forcing the agency to apologize.
Similarly, YesMadam’s campaign has been accused of exploiting a grave issue—mass layoffs—to generate publicity.
The ethical dilemma: where does one draw the line?
While YesMadam claimed it intended to promote employee wellness, experts argue the method was deeply flawed.
“No sane, decent, conscientious person would indulge in this blatant attempt at lying for the sake of generating shock value. Just like no sane, decent, conscientious person would run naked on the street just for shock value. The only reason why they may still indulge is if they mistakenly thought the ends justified the (any) means,” Karthik Srinivasan, Indian communications strategy consultant and music critic wrote in a blog post.
“What stops anyone from NOT indulging in such blatantly false shock-value tactics in the name of marketing? The reason is rather simple – that it is wrong to mislead people with something false, no matter what the justification,” he added.
Srinivasan also pointed out how the stunt risks the brand’s credibility:
“Sure, a lot more people would be aware of YesMadam’s existence, but why presume that all those who know of YesMadam today would also trust the brand to deliver their services adequately or appropriately?” He added,
Visibility is not equal to consideration. Also, more importantly, consider the route in which all those people are now aware of the brand’s existence: that brand that lied that it fired over 100 people as part of a fake marketing stunt. Not a good introduction, eh?
Founded in 2016 by brothers Aditya and Mayank Arya, YesMadam currently operates in over 55 Indian cities. The company reported a revenue of ₹45 crore in FY24 and aims to hit ₹100 crore this year.
Marketing strategies built around creating shock value, commonly referred to as “shockvertising,” have been a staple of advertising for decades.
This method, known for its audacious and boundary-pushing nature, is frequently used by brands to craft campaigns that grab attention and spark conversation.
Shock marketing isn’t solely about courting controversy; it often taps into deeper societal and cultural issues, positioning brands as relevant and prominent voices in public discourse.
What, then, sets apart a “good” shock campaign from an inappropriate one? More importantly, where does one draw the line?
“The line on using marketing gimmicks just can’t be drawn. Do understand that marketing itself is a gimmick, and to that extent, there are people who push the envelope a bit too far to be in the limelight,” Harish Bijoor, brand expert, and founder, Harish Bijoor Consults, told Invezz.
“The key idea seems to be that all publicity is good. Good publicity is not necessarily the only publicity to get, bad publicity is equally good. Who would have otherwise heard of little-known names that have used crazy ways of reaching a consumer’s mind, mood, sentiment, all together?” Bijoor said.
However, Bijoor acknowledged that the YesMadam example is a double-edged sword.
I believe that it cuts into the brand ethos of the entity responsible for this more than any publicity the company might have gained.
Meanwhile, Mukherjee added:
Layoffs aren’t a marketing gimmick; they’re a life-altering reality. Campaigns like this don’t raise awareness; they erode trust, trivialize genuine issues, and make a mockery of the very people they claim to support.
Workplace stress and mental health in India
The controversy also shed light on India’s corporate wellness landscape.
While conversations around workplace mental health have gained momentum, significant gaps remain in addressing the issue.
A tragic incident in July underscored this reality. A 26-year-old Ernst & Young employee in India reportedly succumbed to overwhelming work pressure, sparking widespread concern.
EY refuted the claims, but the incident highlighted the growing toll of workplace stress.
According to ICICI Lombard’s India Wellness Index 2024, there has been an 11% decline in access to mental health support services for corporate employees and an 8% decline in awareness of effective coping mechanisms.
Esha Pahuja Verma, a senior psychologist at Trijog- a Mumbai-based organization providing adult counseling, child counseling, and corporate well-being solutions, said that while YesMadam’s intent to spread awareness about corporate wellness may have stemmed from a positive place, the drastic approach can increase stress levels and anxiety, particularly in workplaces with high-pressure environments where employees are already unable to manage their emotional well being.
Pahuja told Invezz:
Additionally, these methods can create an environment of mistrust and insecurity within the organization. Trust is a critical component of workplace wellness, and such actions risk creating a counterproductive atmosphere of fear and skepticism.
Pahuja said that presently, the corporate wellness setup is on a positive incline wherein many companies and leaders are adopting measures to destigmatize mental health concerns and also providing progressive means like EAP platforms.
These platforms incorporate different aspects of wellness like counseling support, physical health, legal and financial aid, learning and development, etc.
However, significant gaps remain due to stigma, lack of awareness, and insufficient resources, often leading to severe consequences like anxiety, depression, strained relationships, and, in extreme cases, self-harm or substance abuse, she said.
Building a culture of wellness
Experts agree that fostering a healthy workplace culture requires more than attention-grabbing campaigns.
Pahuja Verma emphasized the importance of transparent and empathetic communication to foster psychological safety, enabling employees to voice concerns and trust leadership for support.
She highlighted the need for leaders trained in empathetic communication and emotional first aid.
Flexible work policies, a performance-based approach, constructive feedback, and learning opportunities can help employees recharge and manage work more effectively.
Sensitivity and compassion in addressing mental health are essential, she concluded.
On Thursday, the Bank of Japan (BOJ) maintained its benchmark interest rate at 0.25%, citing uncertainties in Japan’s economic activity and pricing dynamics.
The move comes as the yen weakened 0.3% against the dollar, falling to a one-month low of 155.42, while the Nikkei 225 index slipped 0.85%.
The BOJ’s cautious stance highlights the delicate balance it faces amid inflation pressures and wavering economic resilience.
BOJ surprises markets by holding rates
Economists polled by Reuters had largely anticipated a 25-basis-point rate hike, but the central bank opted for stability, signaling ongoing concerns over the broader economic landscape.
The BOJ board’s decision was not unanimous, with an 8-1 vote where board member Naoki Tamura pushed for a rate increase.
In its statement, the BOJ emphasized that “high uncertainties surrounding Japan’s economic activity and prices” persist.
It also highlighted the growing influence of exchange rate fluctuations on pricing, particularly as firms increasingly raise wages and prices.
The decision contrasts sharply with the US Federal Reserve, which recently cut rates by 25 basis points to a range of 4.25%-4.5%.
Analysts believe the BOJ’s cautious approach reflects its struggle to align monetary policy with government concerns over Japan’s fragile GDP growth, which is projected to turn negative in 2024.
Economic data suggests resilience
Despite the BOJ’s conservative stance, recent data paints a more optimistic picture of Japan’s economic resilience.
Headline inflation stood at 2.3% in October, marking the 30th consecutive month above the central bank’s 2% target.
November’s inflation data, due Friday, will provide further insight into the country’s inflationary trends.
Business sentiment has also shown signs of improvement.
The latest BOJ Tankan survey revealed that the index for large manufacturing firms rose to 14 in the December quarter, surpassing expectations of 12 and improving from 13 in the previous quarter.
This metric, which gauges business sentiment, underscores that optimism currently outweighs pessimism among Japan’s large corporations.
According to a Dec. 13 note by analysts at Bank of America, the Tankan survey suggests that Japan’s economy remains on a stable footing.
They noted that inflation and economic activity are trending in line with the BOJ’s baseline scenario, which could pave the way for future rate adjustments.
However, analysts caution that the urgency for a rate hike is limited.
Imported inflationary pressures have been easing, and companies’ medium-term inflation expectations appear stable.
Japan’s GDP has contracted year-on-year in the first two quarters of 2024, with only a modest 0.5% growth in the third quarter.
With real GDP growth projected to dip into negative territory next year, the BOJ is treading carefully to avoid further economic disruption.
Market watchers will now turn their attention to inflation data and upcoming policy meetings to assess how Japan navigates its economic challenges amid global monetary tightening trends.
The BOJ’s next steps will likely hinge on incoming economic data and global market developments, particularly as exchange rate volatility continues to influence Japan’s inflation trajectory. For now, the central bank appears committed to a cautious, data-driven approach.
The USD/NOK exchange rate jumped to its highest level since March 2020 as crude oil prices dropped and as the US dollar index surged. The pair was trading at 11.35 on Thursday morning as traders waited for the upcoming Norges interest rate decision.
Federal Reserve decision
The USD/NOK exchange rate reacted to the latest Federal Reserve decision, which was relatively more hawkish than expected.
The Fed decided fo slash interest rates by 0.25% as was widely expected, bringing the official cash rate to between 4.25% and 4.50%. It has now slashed rates by 1% this year.
Officials hinted that they will deliver two more rate cuts in 2024, lower than the expected two, making the Fed highly hawkish.
These officials are mostly concerned about the upcoming Donald Trump administration that has proposed some highly inflationary policies.
Trump has pledged to deport millions of illegal immigrants, a move that will affect the already tight labor market. He also wants to announce large tariffs on imports and lower taxes.
Fed officials also tweaked their inflation estimates. They now expect that the headline Consumer Price Index (CPI) will fall to 2% by 2026, meaning that rates may stay higher for longer.
The US dollar index surged hard after the Fed decision as other assets like the Dow Jones and Bitcoin slumped hard.
Norges Bank and oil prices
The next important USD/NOK news will be the upcoming Norges Bank interest rate decision. Unlike the Federal Reserve and other central banks, Norges has left rates unchanged in the last eight consecutive meetings. It has left them at 4.50% and analysts expect the bank to maintain that view in this meeting.
Still, the bank will likely hint that it will start cutting rates in the coming meetings since inflation has fallen. The most recent data showed that the headline Consumer Price Index (CPI) has dropped to 2.4% from the 2022 high of 7.5%.
Norges Bank will also slash rates because of the ongoing weakness in Europe, its biggest trading market.
The USD/NOK pair has also rallied because of the energy market, which has deteriorated this year. Brent, the global oil benchmark, has dropped to $70 from the year-to-date high of over $100.
The Norwegian krona reacts to the oil market because Norway is one of the biggest oil exporting countries in Europe.
USD/NOK technical analysis
The USD/NOK exchange rate has been in a strong uptrend in the past few weeks. It has now soared above the important resistance point at 11.28, the upper side of the ascending triangle pattern.
The pair has also moved above the 50-week moving average, while most oscillators like the Relative Strength Index (RSI) and the MACD have all tilted upwards. Therefore, the pair will likely keep rising as bulls target the next key resistance level at 11.50.
A drop below the support at 11.28 will invalidate the bullish view and point to more downside, potentially to 11.
The South African rand has remained on edge as emerging market currencies slumped after the hawkish Federal Reserve interest rate decision. The USD/ZAR exchange rate rose to a high of 18.35, its highest level since in November. It has risen by 7.3% from its lowest point in October this year.
Hawkish Fed slams emerging market currencies
The USD/ZAR pair has rebounded in the past few weeks after the relatively hawkish Federal Reserve slumped emerging market currencies. For example, the Brazilian realand the Indian rupee have all crashed to a record low this year.
This performance is because the Fed has largely embraced a higher-for-longer monetary policy approach. In its last meeting of the year, the bank decided to slash interest rates by 0.25% as was widely expected.
The bank also hinted that it would deliver fewer rate cuts than it had previously guided. Instead, officials pointed to just two interest rate cuts in 2025 as they remained concerned about the incoming administration.
Donald Trump has made many policy pledges, most of which will be inflationary. He has hinted that he will cut taxes, deport millions of illegal migrants, and impose tariffs in a bid to lower the large trade deficit.
These policies will likely lead to higher inflation. Tariffs will be passed to American consumers, who will now start paying much more for products. That’s because the US would need substantially higher tariffs to encourage companies to start building in the country.
Deporting illegal migrants will largely be inflationary because these people work in key industries like agriculture and construction. Without enough workers, companies will need to hike wages and prices.
A more hawkish Fed means that emerging market countries like South Africa that have higher exposue to US dollar debt will pay more. That’s because the cost of borrowing in the US has continued rising, with the 30-year and 10-year yields rising to over 4%.
South African interest rates
The USD/ZAR pair also reacted to the political issues in South Africa, where there are risks that the political union between the ANC and the Democratic Alliance will not work out in the long term.
The DA Party has warned Ramaphosa against firing its ministers. These uncertainties are having an impact on the economy. Data released this week showed that a gauge measuring the level of confidence in government policy pointed to uncertainty.
A recent report showed that the economic recovery was still taking time. The economy contracted by 0.3% in the third quarter as the agricultural sector worsened. It expanded by 0.4% in the first nine months of the year, lower than the expected 1.1%.
The South African Reserve Bank has started to slash interest rates in a bid to boost the economy. It slashed rates by 0.25% in the last meeting in November, bringing the prime rate to 11.25%. It also cut the prime rate by 0.25% to 7.75%.
The daily chart shows that the USD to ZAR exchange rate has risen in the past few weeks. It has jumped from the year-to-date low of 17 to the current 18.35. The pair is hovering at a key resistance since this price was the highest swing on November 13.
It has moved above the 50-day and 25-day Exponential Moving Averages. Most importantly, it has showed signs of forming a double-top chart pattern, a popular bearish reversal sign whose neckline is at 17.61.
Therefore, the path of the least resistance for the pair is bullish, with the next point to watch being at 18.70, the highest swing on August 2
The South Korean won plunged to its weakest level in 15 years on Thursday, reflecting heightened economic and political risks.
The currency was trading at 1,449.9 per dollar in early onshore trade, down 0.96% from the previous session.
This marks the lowest level for the won since March 2009.
The drop comes after the US Federal Reserve adopted a cautious approach to future interest rate cuts, coupled with domestic instability stemming from President Yoon Suk Yeol’s controversial martial law order earlier this month.
The won has now weakened 11% year-to-date, making it the worst-performing Asian currency of 2024.
US Fed’s hawkish stance adds pressure
On Wednesday, the US Federal Reserve cut interest rates as widely anticipated, but Chair Jerome Powell’s remarks signalled that further cuts would depend on sustained progress in controlling inflation.
This hawkish stance boosted the dollar, exacerbating the won’s decline.
The dollar index, which measures the US currency against six major currencies, climbed to a two-year high of 108.086, up 0.05%, reaching its highest level since November 2022.
The South Korean central bank has flagged significant downside risks to the country’s economic growth, compounding the pressure on its currency.
The Bank of Korea has cited the lingering economic effects of the Dec. 3 martial law order, warning that the nation’s growth forecasts for 2024 and 2025 could face substantial downward revisions.
The won’s decline extends its losses for a third consecutive month, dropping 3.9% against the dollar in December.
Political instability undermines investor confidence
South Korea’s political landscape has further dampened investor sentiment.
President Yoon’s brief imposition of martial law earlier this month has raised concerns over governance and stability.
This political uncertainty has contributed to a 2% drop in the benchmark KOSPI index, driven by foreign investors offloading South Korean equities.
In response to the market volatility, South Korea’s finance minister pledged swift and decisive interventions if fluctuations in financial markets were deemed excessive.
Measures under consideration include stabilisation policies aimed at containing foreign exchange volatility.
Despite assurances from policymakers, the won has remained under intense pressure.
Market participants suggest that authorities may be attempting to defend the 1,450 level, making it challenging for traders to bet against the currency.
South Korea’s financial regulator has instructed local banks to manage foreign exchange transactions and loans flexibly to mitigate market stress.
Year-to-date performance marks a dismal outlook for the won
The won’s performance in 2024 has been its worst since the global financial crisis of 2008.
Its year-to-date decline of 11% highlights the currency’s vulnerability to external shocks and domestic challenges.
Analysts predict that sustained pressure from a strong US dollar and political instability could further weigh on the currency in the coming months.
The downturn in the won has also reverberated through South Korea’s equity markets.
The KOSPI index fell 2% on Thursday, with foreign investors pulling out of local shares.
This marks a continuation of a bearish trend in South Korean stocks, driven by concerns over economic slowdown and governance issues.
New Zealand’s economy contracted sharply in the third quarter of 2024, with GDP plummeting by 1.0% compared to the previous quarter, according to government data.
This contraction dwarfed market expectations of a modest 0.2% decline.
Combined with a revised 1.1% drop in Q2, the economy has met the technical definition of a recession, marking its steepest two-quarter decline since the 1991 downturn, excluding pandemic-era disruptions.
The surprising scale of the contraction is fuelling concerns about the country’s near-term economic outlook and global standing.
The dismal data has prompted speculation of more aggressive monetary easing by the Reserve Bank of New Zealand (RBNZ).
The local dollar plunged to a two-year low of $0.5614 following the announcement, reflecting concerns over the nation’s economic trajectory.
Swaps now suggest a 70% likelihood of a 50-basis-point cut at the RBNZ’s next meeting in February, with interest rates forecasted to drop to 3.0% by the end of 2025.
RBNZ under pressure as economy falters
The RBNZ has already slashed interest rates by 125 basis points this year, bringing them to 4.25%, yet the worsening economic data adds pressure for further reductions.
Economists are now considering the possibility of a larger 75-basis-point cut in February, with rates potentially falling below neutral to 2.25%.
These dramatic rate cuts highlight the RBNZ’s struggle to balance inflation control with the need to stimulate growth in an increasingly fragile economy.
The sharp contraction caught policymakers off guard.
Just days earlier, New Zealand’s Treasury had forecasted a mild 0.1% decline for Q3, significantly underestimating the scale of the downturn.
Finance Minister Nicola Willis criticised the central bank’s handling of monetary policy, highlighting the detrimental effects of its inflation-control measures on economic growth.
“The decline reflects the impact of high inflation on the economy,” said Willis, acknowledging the central bank’s role in engineering the recession.
The minister also noted that further revisions to fiscal projections may be necessary to account for weaker-than-expected revenue.
Fiscal and economic challenges deepen
The economic slump has derailed government plans for fiscal recovery, with budget deficits now projected to persist for the next five years.
This grim fiscal outlook compounds the challenges faced by policymakers as they navigate a weak global environment and subdued domestic demand.
Analysts caution that failure to address these fiscal and structural issues could lead to prolonged economic stagnation.
Thursday’s report underscores the fragility of New Zealand’s economy as it grapples with the dual pressures of high inflation and a hawkish US Federal Reserve.
The latter has maintained a tighter monetary stance, further weighing on the Kiwi dollar and global market sentiment.
Economists warn that New Zealand’s downturn could deepen without decisive policy action.
While rate cuts may offer temporary relief, structural reforms and fiscal measures will be crucial to reviving growth and stabilising the economy in the long term.
The South African rand has remained on edge as emerging market currencies slumped after the hawkish Federal Reserve interest rate decision. The USD/ZAR exchange rate rose to a high of 18.35, its highest level since in November. It has risen by 7.3% from its lowest point in October this year.
Hawkish Fed slams emerging market currencies
The USD/ZAR pair has rebounded in the past few weeks after the relatively hawkish Federal Reserve slumped emerging market currencies. For example, the Brazilian realand the Indian rupee have all crashed to a record low this year.
This performance is because the Fed has largely embraced a higher-for-longer monetary policy approach. In its last meeting of the year, the bank decided to slash interest rates by 0.25% as was widely expected.
The bank also hinted that it would deliver fewer rate cuts than it had previously guided. Instead, officials pointed to just two interest rate cuts in 2025 as they remained concerned about the incoming administration.
Donald Trump has made many policy pledges, most of which will be inflationary. He has hinted that he will cut taxes, deport millions of illegal migrants, and impose tariffs in a bid to lower the large trade deficit.
These policies will likely lead to higher inflation. Tariffs will be passed to American consumers, who will now start paying much more for products. That’s because the US would need substantially higher tariffs to encourage companies to start building in the country.
Deporting illegal migrants will largely be inflationary because these people work in key industries like agriculture and construction. Without enough workers, companies will need to hike wages and prices.
A more hawkish Fed means that emerging market countries like South Africa that have higher exposue to US dollar debt will pay more. That’s because the cost of borrowing in the US has continued rising, with the 30-year and 10-year yields rising to over 4%.
South African interest rates
The USD/ZAR pair also reacted to the political issues in South Africa, where there are risks that the political union between the ANC and the Democratic Alliance will not work out in the long term.
The DA Party has warned Ramaphosa against firing its ministers. These uncertainties are having an impact on the economy. Data released this week showed that a gauge measuring the level of confidence in government policy pointed to uncertainty.
A recent report showed that the economic recovery was still taking time. The economy contracted by 0.3% in the third quarter as the agricultural sector worsened. It expanded by 0.4% in the first nine months of the year, lower than the expected 1.1%.
The South African Reserve Bank has started to slash interest rates in a bid to boost the economy. It slashed rates by 0.25% in the last meeting in November, bringing the prime rate to 11.25%. It also cut the prime rate by 0.25% to 7.75%.
The daily chart shows that the USD to ZAR exchange rate has risen in the past few weeks. It has jumped from the year-to-date low of 17 to the current 18.35. The pair is hovering at a key resistance since this price was the highest swing on November 13.
It has moved above the 50-day and 25-day Exponential Moving Averages. Most importantly, it has showed signs of forming a double-top chart pattern, a popular bearish reversal sign whose neckline is at 17.61.
Therefore, the path of the least resistance for the pair is bullish, with the next point to watch being at 18.70, the highest swing on August 2
Indian power generation major, Tata Power has had a quiet few months at the bourses.
Tata Power’s share price has moderated by around 6% in the past six months.
But, analysts at brokerage firm Sharekhan remain bullish on this Tata Group company.
Tata Power share price prediction
Analysts at the brokerage firm maintained their “buy” rating on the stock with a target price of ₹540 (£5.40).
If the Tata Power share price prediction, it would reflect an around 30% upside from the stock’s current market price of ₹413.
On a year-to-date basis, the Tata Power share price has gone up around 25%.
Why Sharekhan is bullish about Tata Power’s share price
The brokerage’s outlook is based on the company’s focus on expanding its renewable energy and transmission businesses, which are expected to drive sustained earnings growth in the coming years.
During an analyst meeting held earlier this week, Tata Power outlined its growth roadmap for FY30, with an increase in capital expenditure (capex) guidance.
The company has raised its annual capex target to ₹25,000 crore (£2.3 billion), up from ₹22,000 crore previously.
Over the next few years, Tata Power plans to invest ₹1.46 lakh crore, with 60% of this allocation directed towards renewable energy initiatives.
The company’s renewable capacity is expected to more than double, rising from 16.7GW currently to 33GW by FY30.
Operational renewable capacity is also set to increase from 6.7GW to 23GW during this period, further cementing Tata Power’s position in the growing green energy space.
Key highlights from Tata Power’s plan:
Renewable energy expansion: The company targets a renewable energy capacity of 23GW by FY30, up from the current 6.7GW. This will raise the share of renewable energy capacity in the company’s overall capacity to 65%.
Rooftop solar: Tata Power is also poised to benefit from the rapid growth in India’s rooftop solar market, which is expected to grow at a 36% compound annual growth rate (CAGR) between FY24 and FY30.
Transmission growth: The company aims to expand its transmission network, with a projected growth in transmission capacity from 4,633 circuit kilometers (Ckm) to 10,500 Ckm by FY30. This will require a capex of ₹24,850 crore.
Distribution business and customer base: In distribution, Tata Power plans to increase its customer base from 12.5 million to 40 million by FY30, further enhancing its reach.
International expansion: The company has signed a memorandum of understanding (MoU) with Druk Green Power in Bhutan for clean energy projects, contributing to its international growth strategy.
Tata Power earnings projections
Sharekhan’s confidence in Tata Power’s future growth is reflected in its earnings projections.
The brokerage expects the company’s EBITDA and PAT to rise by 2.4x and 2.5x, respectively, by FY30 compared to FY24 levels.
Revenue is anticipated to grow by 1.6x, reaching ₹1 lakh crore by FY30.
The focus on renewable energy and transmission is expected to significantly contribute to the company’s long-term growth, with the share of renewables in Tata Power’s PAT projected to increase to 50% by FY30, up from 21% currently.
The iShares Russell 2000 ETF (IWM) crashed hard after the Federal Reserve delivered a highly hawkish interest rate decision. It slumped by over 3%, reaching a low of $218, its lowest level since November 5. It has dropped by almost 10% from the highest level this year, meaning that it is nearing a short-term correction.
Rotation from bonds delayed
The IWM ETF has plunged after the Federal Reserve delivered a highly hawkish interest rate decision on Wednesday.
On the positive side, the bank decided to cut interest rates by 0.25%, bringing the year-to-date cuts to 1%. However, the Fed also hinted that rates will not fall as fast as what analysts were expecting.
Instead, the dot plot hinted that the bank will cut rates two times in 2024. In his press conference, Jerome Powell noted that the US was doing well, with the labor market being highly strong.
Powell’s key concern is that Donald Trump’s policies will have an impact on inflation and economic growth. Trump has pledged to hike tariffs, a move that will lead to more inflation in the long term.
The hawkish Fed decision had a big impact on the stock market as the Dow Jones, Nasdaq 100, and S&P 500 indices fell by more than 2%
One reason for this is that American bond yieldshave continued to rise this week. This means that the much-anticipated rotation from bonds and money market funds to stocks will take longer. Recent data showed that the total assets in money market funds stood at over $6.77 trillion last week.
The general view is that investors will move from bonds to stocks when interest rates fall and returns in the bond market fades.
The Russell 2000 index also dropped because most of its companies are small and unprofitable, unlike other indices like the S&P 500 and Dow Jones. Historically, these smaller companies underperform the market when rates are high because they have little cash in their balance sheet.
On the other hand, companies like Apple, Berkshire Hathaway, and Microsoft make money when rates are high in the form of interest income.
Also, there are concerns that the American economy will underperform next year because of Trump’s policies. These companies tend to be highly exposed to the American economy.
Top gainers and laggards in the IWM ETF
IWM ETF companies are often highly volatile, with some surging by over 1,000% and others falling by almost 100%.
Mondee Holdings, a company that provides travel technology solutions, was the worst performer as it crashed by 98% this year. It was followed by Canoo,a company that is building electric vehicles. Canoo stock has fallen by 97% this year and has higher odds of filing for bankruptcy.
The other notable laggard in the IWM ETF is Luminar Technologies, a company that is working on Lidar solutions for the automobile industry. Virgin Galactic, Chegg, Marketwise, iRobot, Sage Therapeutics, and B. Riley were other notable laggards.
On the other hand, companies like Sezzle, Rigetti Computing, SoundHound, Root, Intuitive Machines, Core Scientific, and CleanSpark were some of the best performers.
The daily chart shows that the IWM ETF has been in a strong bullish trend in the past few months. It recently jumped to a record high of $245 as the bull market intensified.
The ETF reversed after it formed a small double-top chart pattern, a popular bearish sign. It has also moved slightly below the 50-day and 100-day Exponential Moving Averages (EMA).
The MACD and the Relative Strength Index (RSI) have all pointed downwards. Most importantly, the fund has formed a broadening wedge pattern, a sign that it may go through a deeper retreat in 2025. This is in line with my last S&P 500 index forecast.
