The Euro is the official currency of the Eurozone, used by millions across Europe. It is the second most traded currency and signifies European economic unity.

Top 7 Most Famous Currencies

The US Dollar dominated 2024 as the year&rsquo;s best-performing currency, driven by Donald Trump&rsquo;s return to the white house and promises of tax cuts and economic revival.&nbsp;
Investors cheered as economic data improved, inflation rebounded, and the federal reserve maintained high interest rates under Jerome Powell.
This potent mix propelled the dollar higher, leaving major currencies like the pound and euro trailing.&nbsp;
<h2>&lsquo;Winners and losers in 2024 currency race&rsquo;</h2>
Sterling fell 1.4 per cent to $1.26, while the euro dropped 5.5 per cent to $1.04, with analysts predicting parity in 2025.&nbsp;
Across the G10, the Japanese Yen and Norwegian Krone also slumped by over 10 per cent.&nbsp;
However, experts caution that trump&rsquo;s preference for a weaker dollar could reshape the narrative.
In emerging markets, Kenya&rsquo;s Shilling surged 20 per cent, driven by successful government financing and a Eurobond issuance, marking a sharp reversal from earlier lows.&nbsp;
Sri Lanka&rsquo;s rupee climbed 11 per cent amid stabilizing inflation, while Liberia&rsquo;s dollar rose 5 per cent, aided by the International Monetary Fund (IMF) support.
At the other end, Nigeria&rsquo;s Naira and Ethiopia&rsquo;s Birr tumbled 41 per cent and 55 per cent, respectively, following shifts to more flexible exchange regimes.&nbsp;
The Lebanese Lira performed the worst, losing over 80 per cent of its value amid political turmoil and economic collapse, compounded by war and severe devaluation.
While reforms and IMF interventions offer hope for struggling currencies, global economic dynamics remain volatile, with 2025 poised to deliver fresh challenges and surprises in the currency markets.
(With inputs from the agencies)

Business & Economy: The US Dollar dominated 2024 as the year’s best-performing currency, driven by Donald Trump’s return to the white house and promises economic revival.

The US Dollar dominated 2024 as the year’s best-performing currency, driven by Donald Trump’s return to the white house and promises of tax cuts and economic revival. Investors cheered as economic data improved, inflation rebounded, and the federal reserve maintained high interest rates under Jerome Powell. This potent mix propelled the dollar higher, leaving major currencies like the pound and euro trailing. ‘Winners and losers in 2024 currency race’ Sterling fell 1.4 per cent to $1.26, while the euro dropped 5.5 per cent to $1.04, with analysts predicting parity in 2025. Across the G10, the Japanese Yen and Norwegian Krone also slumped by over 10 per cent. However, experts caution that trump’s preference for a weaker dollar could reshape the narrative. In emerging markets, Kenya’s Shilling surged 20 per cent, driven by successful government financing and a Eurobond issuance, marking a sharp reversal from earlier lows. Sri Lanka’s rupee climbed 11 per cent amid stabilizing inflation, while Liberia’s dollar rose 5 per cent, aided by the International Monetary Fund (IMF) support. At the other end, Nigeria’s Naira and Ethiopia’s Birr tumbled 41 per cent and 55 per cent, respectively, following shifts to more flexible exchange regimes. The Lebanese Lira performed the worst, losing over 80 per cent of its value amid political turmoil and economic collapse, compounded by war and severe devaluation. While reforms and IMF interventions offer hope for struggling currencies, global economic dynamics remain volatile, with 2025 poised to deliver fresh challenges and surprises in the currency markets. (With inputs from the agencies)

Fate of currencies: Dollar dominates as 2024's top currency

The dollar began the week on a cautious note Monday as markets prepared for upcoming US inflation data and a busy schedule of Federal Reserve speeches. Meanwhile, the yuan continued to struggle, weighed down by the lacklustre response to Beijing's most recent stimulus package, according to a detailed Reuters report.

Weak economic background in China<o:p></o:p>

Highlighting the weak background in China, data out over the weekend showed consumer prices rose at the slowest pace in four months in October while producer price deflation deepened. Reports on retail sales and industrial output due Friday should show whether Beijing's various attempts at stimulus are having any real impact on demand, the Reuters report detailed further.

Disappointment at the latest package had seen the Australian and New Zealand dollars slide on Friday as both countries are major exporters to China. The dollar stood at 7.1970 yuan, having jumped 0.7 per cent on Friday, and looks set to again test the 7.2000 barrier.

Moves were minor overall, with US bond markets on holiday though stocks and futures are open. The dollar was up 0.1 per cent on the yen at 152.90, having been dragged off last week's top of 154.70 by the risk of Japanese intervention. The dollar index was a fraction firmer at 105.00, after gaining 0.6 per cent last week mainly against the euro.

The Reuters report further elaborated that, the single currency was stuck at $1.0711, having shed 1 per cent last week to as low as $1.0683. Support now lies around $1.0667 and $1.0601. Political uncertainty remained a drag as German Chancellor Olaf Scholz said he would be willing to call a vote of confidence before Christmas, paving the way for snap elections following the collapse of his governing coalition.

The threat of a global trade war looms<o:p></o:p>

The Euro has been pressured by US President-elect Donald Trump's proposals for tariffs on imports, which could hurt European exports and risk a global trade war. Analysts also assume Trump's policies would put upward pressure on US inflation and bond yields while limiting the Federal Reserve's scope to ease policy. 

"Given this, we still expect that the Fed will cut another 25bp at the December meeting, but thereafter will only cut once per quarter, in contrast to our previous forecast for a 25bp cut every meeting," said JPMorgan economist Michael Feroli.

"In addition, we now look for the Fed to conclude once it reaches 3.5 per cent, versus our earlier forecast for a 3.0 per cent terminal rate."

A host of Fed officials speak this week, including Chair Jerome Powell on November 14, so there will be plenty of guidance on the outlook for rates.

Data will also be influential as US consumer prices are due November 14 and a core reading above the 0.3 per cent forecasted would further reduce the chance of a December easing. All this was seen as bullish for the dollar over the long term, though it was yet to be seen what Trump's policies would be in practice. 

His support of cryptocurrencies has been enough to propel Bitcoin above $80,000 for the first time as investors wager on more favourable regulation. 

Market participants and global investors will follow these developments carefully and see how the Trump administration takes a stand on tariffs. This will help them in taking informed investment decisions.

The dollar began the week on a cautious note Monday as markets prepared for upcoming US inflation data and a busy schedule of Federal Reserve speeches. Meanwhile, the yuan continued to struggle, weighed down by the lacklustre response to Beijing's most recent stimulus package, according to a detailed Reuters report.

The dollar began the week on a cautious note Monday as markets prepared for upcoming US inflation data and a busy schedule of Federal Reserve speeches. Meanwhile, the yuan continued to struggle, weighed down by the lacklustre response to Beijing's most recent stimulus package, according to a detailed Reuters report. Weak economic background in China Highlighting the weak background in China, data out over the weekend showed consumer prices rose at the slowest pace in four months in October while producer price deflation deepened. Reports on retail sales and industrial output due Friday should show whether Beijing's various attempts at stimulus are having any real impact on demand, the Reuters report detailed further. Disappointment at the latest package had seen the Australian and New Zealand dollars slide on Friday as both countries are major exporters to China. The dollar stood at 7.1970 yuan, having jumped 0.7 per cent on Friday, and looks set to again test the 7.2000 barrier. Moves were minor overall, with US bond markets on holiday though stocks and futures are open. The dollar was up 0.1 per cent on the yen at 152.90, having been dragged off last week's top of 154.70 by the risk of Japanese intervention. The dollar index was a fraction firmer at 105.00, after gaining 0.6 per cent last week mainly against the euro. The Reuters report further elaborated that, the single currency was stuck at $1.0711, having shed 1 per cent last week to as low as $1.0683. Support now lies around $1.0667 and $1.0601. Political uncertainty remained a drag as German Chancellor Olaf Scholz said he would be willing to call a vote of confidence before Christmas, paving the way for snap elections following the collapse of his governing coalition. The threat of a global trade war looms The Euro has been pressured by US President-elect Donald Trump's proposals for tariffs on imports, which could hurt European exports and risk a global trade war. Analysts also assume Trump's policies would put upward pressure on US inflation and bond yields while limiting the Federal Reserve's scope to ease policy. "Given this, we still expect that the Fed will cut another 25bp at the December meeting, but thereafter will only cut once per quarter, in contrast to our previous forecast for a 25bp cut every meeting," said JPMorgan economist Michael Feroli. "In addition, we now look for the Fed to conclude once it reaches 3.5 per cent, versus our earlier forecast for a 3.0 per cent terminal rate." A host of Fed officials speak this week, including Chair Jerome Powell on November 14, so there will be plenty of guidance on the outlook for rates. Data will also be influential as US consumer prices are due November 14 and a core reading above the 0.3 per cent forecasted would further reduce the chance of a December easing. All this was seen as bullish for the dollar over the long term, though it was yet to be seen what Trump's policies would be in practice. His support of cryptocurrencies has been enough to propel Bitcoin above $80,000 for the first time as investors wager on more favourable regulation. Market participants and global investors will follow these developments carefully and see how the Trump administration takes a stand on tariffs. This will help them in taking informed investment decisions.

Dollar prepares for US inflation data and remarks from multiple Fed officials

The yen found itself hovering near a 10-week low on Friday, while the dollar continued its upward trajectory towards a fourth consecutive weekly advance. <o:p></o:p>

According to a Reuters report, the currency market witnessed adjustments as traders recalibrated their expectations concerning the timing of interest rate changes by the Bank of Japan (BOJ) and the potential for rate cuts by the Federal Reserve.<o:p></o:p>

The yen, barely flinching after Japanese Finance Minister Shunichi Suzuki's statement that he was "watching FX moves carefully," remained little changed at 149.315 per dollar in early Asian trading. <o:p></o:p>

The yen's lack of response to Suzuki's warning underscores the nuanced considerations at play in the currency market. <o:p></o:p>

Meanwhile, BOJ Deputy Governor Shinichi Uchida's recent remarks contributed to the yen's weakened position, stating that it is "hard to imagine" a rapid increase in rates even after ending the negative interest rate policy.<o:p></o:p>

In the realm of the dollar, the dollar index, measuring the currency against six major peers, stood steady at 104.15. <o:p></o:p>

The dollar's resilience was evident as it gained 0.1 per cent following fresh data pointing to the robustness of the US labour market. <o:p></o:p>

This follows a week where the dollar index has climbed 0.18 per cent, propelled by strong monthly payrolls data and a hawkish stance from Fed Chair Jerome Powell. <o:p></o:p>

Traders, once anticipating early Fed rate cuts, now lay just 16.5 per cent odds for a rate cut at the Fed's next policy meeting in March, a significant shift from 65.9 per cent odds a month ago.<o:p></o:p>

Reuters cited Richard Franulovich, Westpac's head of foreign exchange strategy, who predicts a potential rally toward 105.50 for the dollar index, emphasising latent upside fuel for the US currency. <o:p></o:p>

He notes that while pricing for the March Federal Open Market Committee (FOMC) has been reduced, there is still potential for a USD rally in subsequent FOMC meetings. <o:p></o:p>

Franulovich anticipates US resilience extending well into 2024, contributing to a potentially bumpy disinflation last mile.<o:p></o:p>

Turning attention to other currencies, the euro remained relatively stable at $1.0774, and the sterling showed little movement at $1.2619. Both currencies demonstrated resilience amid efforts by the European Central Bank and Bank of England officials to counter market expectations of early rate reductions. <o:p></o:p>

New Zealand's dollar, on the other hand, gained 0.34 per cent to $0.6117, supported by bets for a delayed start to Reserve Bank rate cuts or the potential for further hikes, following stronger-than-forecast job market data.<o:p></o:p>

In the realm of cryptocurrency, bitcoin traded little changed at around $45,300, maintaining its position as a significant player in the ever-evolving financial landscape. <o:p></o:p>

(With inputs from Reuters)<o:p></o:p>

The yen found itself hovering near a 10-week low on Friday, while the dollar continued its upward trajectory towards a fourth consecutive weekly advance. According to a Reuters report, the currency market witnessed adjustments as traders recalibrated their expectations concerning the timing of interest rate changes by the Bank of Japan (BOJ) and the potential for rate cuts by the Federal Reserve.

The yen found itself hovering near a 10-week low on Friday, while the dollar continued its upward trajectory towards a fourth consecutive weekly advance. According to a Reuters report, the currency market witnessed adjustments as traders recalibrated their expectations concerning the timing of interest rate changes by the Bank of Japan (BOJ) and the potential for rate cuts by the Federal Reserve. The yen, barely flinching after Japanese Finance Minister Shunichi Suzuki's statement that he was "watching FX moves carefully," remained little changed at 149.315 per dollar in early Asian trading. The yen's lack of response to Suzuki's warning underscores the nuanced considerations at play in the currency market. Meanwhile, BOJ Deputy Governor Shinichi Uchida's recent remarks contributed to the yen's weakened position, stating that it is "hard to imagine" a rapid increase in rates even after ending the negative interest rate policy. In the realm of the dollar, the dollar index, measuring the currency against six major peers, stood steady at 104.15. The dollar's resilience was evident as it gained 0.1 per cent following fresh data pointing to the robustness of the US labour market. This follows a week where the dollar index has climbed 0.18 per cent, propelled by strong monthly payrolls data and a hawkish stance from Fed Chair Jerome Powell. Traders, once anticipating early Fed rate cuts, now lay just 16.5 per cent odds for a rate cut at the Fed's next policy meeting in March, a significant shift from 65.9 per cent odds a month ago. Reuters cited Richard Franulovich, Westpac's head of foreign exchange strategy, who predicts a potential rally toward 105.50 for the dollar index, emphasising latent upside fuel for the US currency. He notes that while pricing for the March Federal Open Market Committee (FOMC) has been reduced, there is still potential for a USD rally in subsequent FOMC meetings. Franulovich anticipates US resilience extending well into 2024, contributing to a potentially bumpy disinflation last mile. Turning attention to other currencies, the euro remained relatively stable at $1.0774, and the sterling showed little movement at $1.2619. Both currencies demonstrated resilience amid efforts by the European Central Bank and Bank of England officials to counter market expectations of early rate reductions. New Zealand's dollar, on the other hand, gained 0.34 per cent to $0.6117, supported by bets for a delayed start to Reserve Bank rate cuts or the potential for further hikes, following stronger-than-forecast job market data. In the realm of cryptocurrency, bitcoin traded little changed at around $45,300, maintaining its position as a significant player in the ever-evolving financial landscape. (With inputs from Reuters)

Yen nears 10-week low, dollar strengthens as traders adjust rate expectations

In 2023, the global economic landscape has seen significant shifts, mirrored by the performance of various currencies. This next report puts the spotlight on the top and worst performing currencies and decodes what's in store for their economies going forward.

Explained: What currency movements say about economies | World Business Watch

Most Asian currencies drifted on Thursday, with investors shying away from risk ahead of key central bank meetings next week and due to political uncertainty in the Middle East.&nbsp;Market players expect the mood to be cautious in the run-up to next Thursday when both the U.S. Federal Reserve and the European Central Bank are expected to hold policy meetings.&nbsp;

A Reuters poll showed a rate rise was almost certain at the Fed&#39;s Dec. 14 meeting, with three or more rate hikes expected next year. Expectations for a more vigorous rate cycle in 2018 got wind from progress in President Donald Trump`s tax cut plans.&nbsp;On the other hand, the ECB is expected to stand pat on policy at its meeting next week in Frankfurt.

Elsewhere, Trump on Wednesday reversed decades of U.S. policy and recognised Jerusalem as the capital of Israel, imperilling Middle East peace efforts and upsetting the Arab world and Western allies alike.&nbsp;The dollar on Thursday shook off losses against the yen, buoyed by optimism on U.S. tax reform and ahead of payrolls data on Friday.&nbsp;Meanwhile, a potential U.S. government shutdown looms if Congress fails to agree on a spending package.

&quot;The debt ceiling limit is another source of worry as emergency measures are only likely to last for 2/3 months before the Treasury runs out of funds,&quot; DBS Group strategists Eugene Leow and Philip Wee said in a note.&nbsp;&quot;Politics is likely to dominate macro cues at a time when valuations for risky assets appear lofty. Brace for volatility ahead.&quot;&nbsp;All local currencies in Asia were subdued, with the Malaysian ringgit the weakest among its peers against the dollar, easing 0.2 percent.

&quot;There&#39;s still quite a lot of equity outflow happening,&quot; said Andy Ji, a strategist for Commonwealth Bank of Australia in Singapore.&nbsp;&quot;The ringgit is still outperforming though&quot;. The Malaysian currency has been on an uptrend since early November, helped by a strong economy and rate rise expectations.

The South Korean won, the region`s biggest decliner in the previous session, was 0.16 percent firmer against the dollar, despite a 0.8-percent fall in the Kospi index.&nbsp;Ji said the won could be trading on the notion of &quot;a very hawkish central bank at this point in time despite a dovish rate rise&quot;.

Last month, the Bank of Korea raised its benchmark rate by 25 basis points to 1.5 percent from a record low level.

Indian Rupee

The rupee firmed marginally on Thursday after the Reserve Bank of India (RBI) kept rates unchanged in its policy meeting the day before, as expected, and left its policy stance &quot;neutral&quot;.&nbsp;The central bank was also seen as slightly softening its language on inflation by saying risks were &quot;evenly balanced&quot;.&nbsp;

The RBI raised its headline inflation projection in the range of 4.3 to 4.7 percent for the second half of 2018, compared with 4.2 to 4.6 percent earlier.&nbsp;&quot;Further upside to inflation and growth will nudge the RBI to turn hawkish, the likelihood of which is steadily rising,&quot; said DBS Group economist Radhika Rao.&nbsp;

With investors shying away from the risks due to anticipated central bank meetings next week, most of the Asian currencies drifted on Thursday.

Most Asian currencies drifted on Thursday, with investors shying away from risk ahead of key central bank meetings next week and due to political uncertainty in the Middle East. Market players expect the mood to be cautious in the run-up to next Thursday when both the U.S. Federal Reserve and the European Central Bank are expected to hold policy meetings. A Reuters poll showed a rate rise was almost certain at the Fed's Dec. 14 meeting, with three or more rate hikes expected next year. Expectations for a more vigorous rate cycle in 2018 got wind from progress in President Donald Trump`s tax cut plans. On the other hand, the ECB is expected to stand pat on policy at its meeting next week in Frankfurt. Elsewhere, Trump on Wednesday reversed decades of U.S. policy and recognised Jerusalem as the capital of Israel, imperilling Middle East peace efforts and upsetting the Arab world and Western allies alike. The dollar on Thursday shook off losses against the yen, buoyed by optimism on U.S. tax reform and ahead of payrolls data on Friday. Meanwhile, a potential U.S. government shutdown looms if Congress fails to agree on a spending package. "The debt ceiling limit is another source of worry as emergency measures are only likely to last for 2/3 months before the Treasury runs out of funds," DBS Group strategists Eugene Leow and Philip Wee said in a note. "Politics is likely to dominate macro cues at a time when valuations for risky assets appear lofty. Brace for volatility ahead." All local currencies in Asia were subdued, with the Malaysian ringgit the weakest among its peers against the dollar, easing 0.2 percent. "There's still quite a lot of equity outflow happening," said Andy Ji, a strategist for Commonwealth Bank of Australia in Singapore. "The ringgit is still outperforming though". The Malaysian currency has been on an uptrend since early November, helped by a strong economy and rate rise expectations. The South Korean won, the region`s biggest decliner in the previous session, was 0.16 percent firmer against the dollar, despite a 0.8-percent fall in the Kospi index. Ji said the won could be trading on the notion of "a very hawkish central bank at this point in time despite a dovish rate rise". Last month, the Bank of Korea raised its benchmark rate by 25 basis points to 1.5 percent from a record low level. Indian Rupee The rupee firmed marginally on Thursday after the Reserve Bank of India (RBI) kept rates unchanged in its policy meeting the day before, as expected, and left its policy stance "neutral". The central bank was also seen as slightly softening its language on inflation by saying risks were "evenly balanced". The RBI raised its headline inflation projection in the range of 4.3 to 4.7 percent for the second half of 2018, compared with 4.2 to 4.6 percent earlier. "Further upside to inflation and growth will nudge the RBI to turn hawkish, the likelihood of which is steadily rising," said DBS Group economist Radhika Rao.

Asian currencies drift as investors shy away from risk

<div style="text-align: justify;">If Britons vote to take their country out of the European Union on June 23, no corner of the global financial market complex will emerge unscathed. 
The invisible thread that links assets as diverse as gold, bank stocks, the Japanese Yen and government bonds would be yanked sharply by Brexit, an event the Bank of England said on Thursday risks &quot;adverse spill-overs to the global economy&quot;. 
With global interest rates and bond yields the lowest on record, central banks running low on crisis-fighting tools and the post-2008 economic recovery flagging, that thread could quickly unravel, with serious consequences for all markets.&nbsp; 
So why will the will of one country&#39;s people in one referendum have such a profound impact on global markets? 
The answer is partly how inter-connected global markets are, and partly timing - the world economic cycle is already very long in the tooth and central banks have far fewer options open to them after nearly a decade of extraordinary policy support. 
Interest rates, yields 
 
Global interest rates are their lowest for 5,000 years, according to Bank of America, but central banks could still cut them further. That could mean the US&nbsp;Federal Reserve reversing its slow-starting tightening cycle, and European Central Bank and Bank of Japan rates going deeper into negative territory. 
Lower rates would also depress bond yields even further, tightening the screw on central and commercial banks. 
 
Over $8 trillion worth of sovereign bonds already carry a negative yield, according to JP Morgan. This means holders of Japanese, German and Swiss debt are paying these governments for the privilege of lending to them, in some cases out to 20 years. 
 
They are willing to accept they will not get all their money back. Even deeper negative yields would increase these losses, raising further doubt that these are truly &quot;safe haven&quot; assets. 
 
But the immediate economic and political uncertainty after a Brexit vote would likely be so great that demand for these bonds would rise anyway, pulling yields even lower. Yield curves, the difference between short- and longer-dated bond borrowing costs, would flatten further. 
 
They are already their flattest for years around the developed world, meaning the premium investors expect for holding longer-dated bonds is shrinking. This is often an ominous signal of low inflation or deflation, and slowing economic growth or possibly recession. 
 
If &quot;core&quot; bond yields would likely fall, yields on lower-rated and riskier bonds would likely rise, widening the spread between the two. This would increase the financing pressure on a wide range of companies around the world and governments in euro zone &quot;periphery&quot; countries like Greece, Italy and Spain. 
 
Banks - Central and Commercial 
 
Flat yield curves are bad news for banks, who make money from borrowing short-term at low rates and lending longer-term at higher rates. Financial stocks have been hit hard this year as the curve flattening has accelerated. 
 
Euro zone banks are down 30 per cent this year, Japanese banks 35 per cent, UK banks 20 per cent, and US banks 10 per cent. 
 
Banks are also being squeezed by negative deposit rates. The ECB, Bank of Japan and Swiss National Bank all charge banks for depositing cash. 
 
It may even become cheaper for banks to put billions of yen, Euros or Francs of their customers&#39; cash in vaults- a possibility German lender Commerzbank is examining. 
 
As for central banks, any move deeper into the uncharted world of negative interest rates would be taken reluctantly. 
 
In the case of the ECB, declining yields would further cut the amount of bonds eligible for purchase as part of its quantitative easing stimulus programme. That would make its inflation target of just under 2 per cent much harder to achieve, in turn putting its credibility under even greater scrutiny. 
 
Financial Planning 
 
Just as the 2007-08 financial crisis was caused by unprecedented stress in the banking system, analysts fear Brexit fallout could again threaten to block the global financial system&#39;s plumbing. 
 
Banks have recovered from 2007-08, but stresses are already appearing in more obscure pockets of dollar-based FX and rates markets that are hitting levels more associated with periods of crisis. The premium for Dollars over Yen in the cross currency basis market is its highest in years. 
 
Spreads between Libor rates and overnight index swap (OIS) rates, broadly a measure of investors&#39; perception of credit risk in the banking system, are also widening. In normal conditions, Libor/OIS spreads should be virtually zero. 
 
Stocks 
 
World stocks are in their longest bull run in history that began on March 9, 2009. But Wall Street&#39;s peak was reached over a year ago, profit growth has slumped, and companies are reluctant to reinvest their record cash piles. 
 
European stocks are down 13 per cent this year, Japan down 20 per cent, and Wall Street is flat. Would they be able to withstand the political, economic and investment shock a Brexit would likely deliver, especially with risk appetite so fragile? 
 
Currencies 
 
Like 2008, a vote for Brexit would almost certainly increase demand for the pre-eminent currency in global trade, banking and financial market trading: the Dollar. 
 
Dollar credit to non-US banks stands at almost $10 trillion, according to the Bank for International Settlements, of which $3.3 trillion is in emerging markets. A stronger Dollar will increase the overall debt burden for these companies, and many emerging market countries, who would be forced to draw down their FX reserves to counter the expected capital outflow and downward pressure on their currencies. 
 
Japan&#39;s Yen, another safe-haven currency, would probably rise too, perhaps as much as 14 per cent, according to Goldman Sachs. This would not be welcome in Tokyo, where policymakers are struggling to kill off deflation once and for all, stoke inflation, reflate the economy and heal the banking system. A higher exchange rate would be damaging on all those fronts. 
 
(Reuters)</div>

World stocks are in their longest bull run in history that began on 9 March, 2009

If Britons vote to take their country out of the European Union on June 23, no corner of the global financial market complex will emerge unscathed. The invisible thread that links assets as diverse as gold, bank stocks, the Japanese Yen and government bonds would be yanked sharply by Brexit, an event the Bank of England said on Thursday risks "adverse spill-overs to the global economy". With global interest rates and bond yields the lowest on record, central banks running low on crisis-fighting tools and the post-2008 economic recovery flagging, that thread could quickly unravel, with serious consequences for all markets. So why will the will of one country's people in one referendum have such a profound impact on global markets? The answer is partly how inter-connected global markets are, and partly timing - the world economic cycle is already very long in the tooth and central banks have far fewer options open to them after nearly a decade of extraordinary policy support. Interest rates, yields Global interest rates are their lowest for 5,000 years, according to Bank of America, but central banks could still cut them further. That could mean the US Federal Reserve reversing its slow-starting tightening cycle, and European Central Bank and Bank of Japan rates going deeper into negative territory. Lower rates would also depress bond yields even further, tightening the screw on central and commercial banks. Over $8 trillion worth of sovereign bonds already carry a negative yield, according to JP Morgan. This means holders of Japanese, German and Swiss debt are paying these governments for the privilege of lending to them, in some cases out to 20 years. They are willing to accept they will not get all their money back. Even deeper negative yields would increase these losses, raising further doubt that these are truly "safe haven" assets. But the immediate economic and political uncertainty after a Brexit vote would likely be so great that demand for these bonds would rise anyway, pulling yields even lower. Yield curves, the difference between short- and longer-dated bond borrowing costs, would flatten further. They are already their flattest for years around the developed world, meaning the premium investors expect for holding longer-dated bonds is shrinking. This is often an ominous signal of low inflation or deflation, and slowing economic growth or possibly recession. If "core" bond yields would likely fall, yields on lower-rated and riskier bonds would likely rise, widening the spread between the two. This would increase the financing pressure on a wide range of companies around the world and governments in euro zone "periphery" countries like Greece, Italy and Spain. Banks - Central and Commercial Flat yield curves are bad news for banks, who make money from borrowing short-term at low rates and lending longer-term at higher rates. Financial stocks have been hit hard this year as the curve flattening has accelerated. Euro zone banks are down 30 per cent this year, Japanese banks 35 per cent, UK banks 20 per cent, and US banks 10 per cent. Banks are also being squeezed by negative deposit rates. The ECB, Bank of Japan and Swiss National Bank all charge banks for depositing cash. It may even become cheaper for banks to put billions of yen, Euros or Francs of their customers' cash in vaults- a possibility German lender Commerzbank is examining. As for central banks, any move deeper into the uncharted world of negative interest rates would be taken reluctantly. In the case of the ECB, declining yields would further cut the amount of bonds eligible for purchase as part of its quantitative easing stimulus programme. That would make its inflation target of just under 2 per cent much harder to achieve, in turn putting its credibility under even greater scrutiny. Financial Planning Just as the 2007-08 financial crisis was caused by unprecedented stress in the banking system, analysts fear Brexit fallout could again threaten to block the global financial system's plumbing. Banks have recovered from 2007-08, but stresses are already appearing in more obscure pockets of dollar-based FX and rates markets that are hitting levels more associated with periods of crisis. The premium for Dollars over Yen in the cross currency basis market is its highest in years. Spreads between Libor rates and overnight index swap (OIS) rates, broadly a measure of investors' perception of credit risk in the banking system, are also widening. In normal conditions, Libor/OIS spreads should be virtually zero. Stocks World stocks are in their longest bull run in history that began on March 9, 2009. But Wall Street's peak was reached over a year ago, profit growth has slumped, and companies are reluctant to reinvest their record cash piles. European stocks are down 13 per cent this year, Japan down 20 per cent, and Wall Street is flat. Would they be able to withstand the political, economic and investment shock a Brexit would likely deliver, especially with risk appetite so fragile? Currencies Like 2008, a vote for Brexit would almost certainly increase demand for the pre-eminent currency in global trade, banking and financial market trading: the Dollar. Dollar credit to non-US banks stands at almost $10 trillion, according to the Bank for International Settlements, of which $3.3 trillion is in emerging markets. A stronger Dollar will increase the overall debt burden for these companies, and many emerging market countries, who would be forced to draw down their FX reserves to counter the expected capital outflow and downward pressure on their currencies. Japan's Yen, another safe-haven currency, would probably rise too, perhaps as much as 14 per cent, according to Goldman Sachs. This would not be welcome in Tokyo, where policymakers are struggling to kill off deflation once and for all, stoke inflation, reflate the economy and heal the banking system. A higher exchange rate would be damaging on all those fronts. (Reuters)

Tracing global market thread that could be unraveled by Brexit

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