Not familiar with hryvnia? If so, you’re not alone. It’s one of the more obscure currencies trading in the world today.
The hryvnia is Ukraine’s currency, and it just took a nosedive. In the last two days, Ukraine’s currency plunged 17%. And even though Ukraine’s President pledged to support the currency, it fell to an all-time lows versus the U.S. dollar.
You can check out the Bloomberg story if you want to read more on how the International Monetary Fund tried bailing out Ukraine, or how Ukrainian credit is currently the third most risky in the world behind Argentina and Ecuador.
You can also hear all about how Ukraine’s President is forcing the central bank to crack down on Forex speculators.
But what is most important to take from this is Ukrainian credit is hugely at risk of default (sounds familiar right?). And a swooning currency makes domestic loans denominated in other currencies that much more expensive to afford.
Why Bother Watching Ukraine – or Ecuador?
This whole story reminds me of Ecuador. Recently, Ecuador officials admitted they couldn’t break even on large amounts of debt, and now Ukraine is walking a similarly ominous line.
So why is this important? Why should you care what’s happening in Ukraine right now – or Ecuador for that matter? (Much less what’s happening with their currencies?)
Well, these two examples highlight a good part of what’s shifting in this global economy. This tells me that things will probably get worse in emerging economies still before they get better.
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