Small Exchange: India’s black money, UK £5 note, Turkey and Venezuela
The week's currency news rounded up.
India's black money creates black market
It has been a turbulent few weeks since India withdrew all 500 and 1,000 rupee banknotes from circulation. As the country comes to grips with this sudden development, Bloomberg reports money-laundering networks are popping up, creating a new black market to assist people in securing legal tender. The government's threat to investigate and penalise those depositing large sums of cash and currency with undeclared origins has encouraged these illegal transactions. Premiums range from 10%-50% of the total being exchanged, depending on the difficulty of the transaction. So far, there have been US$80 billion dollars in deposits, with a significant portion invested into bonds.
UK five pound note isn't vegan, causes controversy
Nearly 130,000 people have signed a change.org petition, insisting the Bank of England find an alternative to using trace amounts of animal fat when producing the nation's new £5 bank notes. During an interview with Australian radio station 2GB, bank note expert Professor David Solomon said vegetarians and vegans shouldn't be concerned that the UK's new polymer currency contains trivial amounts of tallow, an animal fat found in candles and soap. "It’s stupid. It’s absolutely stupid," Solomon said. "There's trivial amounts of it in there." In 1996, Australia switched completely to polymer notes. The new $5 and $10 notes are made from this same material.
Turkey pushes for lira to be used in local tenders and international trade
In an effort to shore up local currency, Turkey's President Tayyip Erdogan has encouraged citizens to cash in foreign exchange holdings for Turkish lira. Erdogan said Turkey was considering allowing commercial trade with China, Russia and Iran to be conducted using local currencies. The lira shaved off one fifth of its value in 2016, due in part to a resurgent US dollar, high interest rates and rumours of a currency crackdown following July's failed military coup d'état.
Venezuela issuing bigger bills
Venezuela's central bank will begin circulating higher-denomination bank notes from 15 December in the form of 500, 1,000, 2,000, 5,000, 10,000 and 20,000 bolivars. Coins to the value of 10, 50, and 100 bolivars will also be distributed. The new notes are being introduced as a way to cope with the South American nation's triple-digit inflation and black market currency collapse. Many Venezuelans don't bother with wallets anymore, instead carrying large bags of cash to buy goods, while shopkeepers have resorted to weighing the currency because there's just too much of it to count. Each week Small Exchange sums up currency news from around the globe and looks at how it impacts exchange rates and options.