Some of the world’s distressed currencies have started to recover. Others have not. The Turkish lira rebounded by 6 percent on Tuesday after the central bank announced a series of measures to ensure that “all the liquidity banks need” will be provided. The free fall of the Russian ruble and the South African rand has likewise ended, though this month the former is down 9 percent against the dollar while the latter is down 13 percent. The Indian rupee and the Kazakh tenge were not so lucky. Both currencies reached all-time lows against the dollar on Tuesday (the rupee recovered slightly before close of business). The Argentine government had to pledge $500 million on Monday to support the peso, which also reached a record low against the dollar, while the National Bank of Kyrgyzstan has intervened to keep the Kyrgyz currency from falling too far. This is not an exhaustive list but merely the most serious right now. Keep an eye on countries like Chile, Mexico, Indonesia, Malaysia, Saudi Arabia and Taiwan – all countries with high levels of dollar-denominated debt.

China’s nonperforming loans surged in June. According to the country’s banking and insurance regulator, NPLs grew by $26.6 billion, settling at a rate of about 1.9 percent. That figure doesn’t sound scary unless you remember that Beijing’s data on its NPLs should never be trusted. China’s rural commercial banks appear to be the hardest hit, accounting for 80 percent of the official increase in NPLs last quarter. The figures were reported before Beijing began to pump liquidity into its beleaguered economy last month, of course, and the June surge can be explained partly by stricter reporting measures. It’ll be important to see if recent efforts will reduce, or at least halt, the rise in NPLs in the next two to three months. Either way, it’s a reminder that for China’s economy the cure can be worse than the disease.

China’s relations with the United States continue to sour – and not only because of trade. U.S. President Donald Trump signed the 2019 National Defense Authorization Act on Monday, appropriating a cool $717 billion to Washington’s defense needs. The Chinese government immediately criticized the move. Beijing isn’t upset that the budget is four times larger than its own (although it is). It’s upset that it strengthens U.S.-Taiwanese cooperation by calling for a comprehensive review of Taiwan’s military. The budget also urges the U.S. government to overhaul its Committee on Foreign Investment, which reviews foreign investment for any potential threats to national security. All of this comes as Taiwan’s president wraps up a two-day visit to the United States that was more highly publicized than usual.

Meanwhile, the situation in Afghanistan looks worse by the day. Taliban fighters reportedly overran an Afghan army base in Ghormach in northwestern Afghanistan. At first glance, this may not seem so dramatic. The U.S. has been urging the Afghan army to pull back from indefensible territory to cities and towns for weeks. But it attests to how badly things have deteriorated in Afghanistan by revealing two painful truths: that U.S.-trained Afghan troops cannot be resupplied or reinforced at a military base, and that Taliban fighters can easily capture Afghan soldiers and their U.S.-provided equipment. The Taliban continue to attack the strategically important city of Ghazni, located on a highway 90 miles (150 kilometers) south of Kabul. The army has been able to keep the fighters at bay, but considering this is the fifth day of fighting, it has not been able to eliminate them entirely.

Honorable Mentions

  • Venezuela is considering increasing gasoline prices to international levels. Gasoline is one of the few things consumers can still buy cheaply in a country in which inflation will reach 1 million percent (not a typo) this year.
  • Uzbekistan’s Foreign Ministry has denied rumors that the Taliban have opened a political office in Tashkent.
  • German Chancellor Angela Merkel will host Russian President Vladimir Putin on Aug. 18.
  • Merkel has said she opposes territorial changes in the Western Balkans because it could once again create ethnic conflict.
  • U.S. Secretary of State Mike Pompeo has said the U.S. wants to strengthen relations with Pakistan.
  • Iraqi Prime Minister Haider al-Abadi is in Ankara to discuss economic relations and other concerns with Turkish officials.
  • The UAE’s minister of state for foreign affairs has said the fight against al-Qaida is going well in Yemen. Yet he also made a veiled reference to other state actors in the region that “negotiate, fund, or support” the group. Is he referring to Saudi Arabia?
  • The United Nations says there are still 30,000 Islamic State fighters in Syria and Iraq.